27 October 2009 17:54 [Source: ICIS news]
LONDON (ICIS news)--The European November monthly contract prices (MCPs) for ethylene (C2) and propylene (C3) were fully confirmed on Tuesday after several buyers and producers followed the initial settlements agreed earlier in the afternoon.
The C2 November MCP was agreed at €833/tonne ($1,243/tonne), down €27/tonne from October, and the C3 MCP was agreed at €740/tonne, down €10/tonne. The settlements, on a free delivered (FD) northwest Europe (NWE) basis, were fully confirmed with several parties.
November C2 and C3 prices fell due to weak demand for derivatives and low spot prices, despite a sharp rise in naphtha feedstock costs during October, market sources said.
A large producer said the settlements would cause a sharp loss on its cracker operating margins.
“Our margins are going back to the levels seen in June and August,” the producer said. “If naphtha stays at these levels producers will struggle to cover costs.”
C2 and C3 buyers said they had hoped for much greater price falls, but had accepted a smaller decrease because of the sharp rise in naphtha feedstock costs during October. Naphtha prices have increased by around 15% during the month so far on the back of higher crude values.
“There is a lot of length,” one of the buyers that followed the C2 settlement said. “You can buy ethylene spot at €725/tonne.With high feedstock costs a higher decrease is difficult to achieve.”
A C3 buyer said it had not been happy with the settlement, but had agreed to it because the market needed to have a timely settlement.
“Asian and US propylene prices are lower. Our buyers expect the same, so we’re going to have to sacrifice margins on derivatives, and there weren’t many to begin with,” the buyer said.
($1 = €0.67)
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