Europe October benzene contract confirmed down €71/t

01 October 2009 14:16  [Source: ICIS news]

Europe Oct benzene price down €71/tLONDON (ICIS news)--The European October benzene contract has been confirmed down €71/tonne at €505/tonne, in line with lower spot values caused by a longer market, two producers and two buyers said on Thursday.

The settlement, which followed an initial agreement earlier on Thursday, was made at a dollar concept of $734/tonne FOB (free on board) NWE (northwest Europe) and converted to the euro price at an officially agreed exchange rate of $1.4549 to €1, one of the producers involved said.

Players said that the decrease had been expected after spot deals in September had almost continuously traded below the contract price, as supply lengthened and prices in other regions also weakened.

The European October contract settled a day late, according to sources, as players involved in the negotiations could not agree on the dollar number.

Traditionally, benzene contract partners use the European Central Bank’s exchange rate from the penultimate day of the previous month, sources said.

The consequent exchange rate for October - €1 = $1.4549 - provided the settlers with some problems this week.

“The delayed negotiations were probably to do with the exchange rate. They were talking about $733-734/tonne and with the official exchange rate, it would be difficult to come to a round euro number,” a trader, who was not directly involved in the negotiations, said.

“Buyers wanted $733/tonne, but this was just their average of deals done on Tuesday,” one of the producers involved in the negotiations said.

In recent months, there had also been growing discontent with the method used to reach the monthly settlement, according to players.

Negotiations are normally based on the deals done on the penultimate day of the previous month, of which partners take the weighted average as a basis to start their negotiations for the dollar number of the new monthly contract price.

Numerous players find this an unfair system, however, since trade usually does the majority of deals, possibly with different agendas, such as trying to open up an arbitrage, sources said.

On Thursday morning, October spot values were already assessed lower at $715-730/tonne CIF (cost, insurance, freight) ARA (Amsterdam, Rotterdam, Antwerp), while November was talked in a $5/tonne backwardation at $710-725/tonne.

The September contract was agreed at $828/tonne, or €576/tonne based on the officially agreed exchange rate at the time. It signalled the first contractual decrease of the year, at almost 20% or $217/tonne down from August.

($1 = €0.68)

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By: Madelon Ten Cate
+44 20 8652 3214

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