04 October 2009 08:57 [Source: ICIS news]
By Nel Weddle
BERLIN (ICIS news)--European olefins players are preparing themselves for the traditional round of discussions focused on long-term strategies and cementing relationships with business partners at the 43rd European Petrochemical Association (EPCA) meeting in Berlin.
Added to the mix in 2009, however, is likely to be discussion about the ability of the European industry to survive the ?xml:namespace>
For many, the key word is agility. Is the European industry agile enough to cope with the rapidly changing ups and downs of the global marketplace?
The fourth quarter of 2008 dramatically showed that this was not the case; while no one could have predicted the unprecedented rapid decline in demand, the European market did not have the means to tackle it in time.
The industry came one step closer to being able to react more quickly to changing market conditions by adopting the monthly contract price (MCP) mechanism after years of debate.
The MCP has now been running since January 2009. Contract participants have generally declared the process a success but one that requires some fine tuning. Will it continue into 2010? Most say it is too late to revert back to quarterly process.
For some long-term proponents of the MCP system, the subject of whether it will continue is not even on the agenda.
“Nobody has brought it up,” said one producer.
However, another source thinks differently: “For me the only thing to be discussed is the pricing mechanisms that are relevant and workable for the future of the European market.”
Also on the EPCA agenda, olefins players will likely be assessing the experiences and repeatability of the events of the last fourth quarter.
Participants will be keeping a very close eye on the pennies but many suggest that the year-end will be flat because stock levels throughout the chain have been kept low all year.
This has been a characteristic of 2009 amid a cautious attitude adopted by the industry due to uncertainty about the near-to-medium term.
For the C4 chain, supply and demand will be the main talking point.
“It’s become clearer and clearer that the supply tightness is a structural issue and not just a temporary one,” a producer said.
The C4 chain has been characterised by tight supply for the past couple of years, leading to high prices, as production has simply not kept pace with demand levels.
European butadiene producers said that they had received more enquiries than usual about contracting volume for 2010, and buyers had already put their specific volume needs on the table, awaiting producer offers.
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