24 February 2010 17:49 [Source: ICIS news]
By Nel Weddle
LONDON (ICIS news)--Initial European propylene (C3) settlements for March contracts at €910/tonne ($1,246/tonne), up by €35, have surprised market participants with some expecting a higher figure while others were poised for a lower one, sources said on Wednesday.
Several sources had anticipated some knock-on effect of the refinery strikes in ?xml:namespace>
In addition, news of problems at Shell’s crackers in
However, last week ahead of the prolonged strike action, market speculation had suggested a talking range of plus €20-€40/tonne over February’s €875/tonne, so the initial settlements just came in at the higher end of the range.
The first settlement came late afternoon on Tuesday and was between a major olefins producer and one of its customers, a major net consumer. This was later followed by another key producer with the same net consumer. All have confirmed agreement.
“To be honest, I expected [to achieve] something bigger, but the rollover on ethylene [C2] limited the increase,” one of the contract sellers said, referring to the settlement earlier on Tuesday of March ethylene at €940/tonne.
“Now the balance between C2 and C3 is there,” it added.
Sources said that news on Tuesday that the strike action looked looked likely to end soon could have tempered the more bullish contract participants.
“The panic is a little bit over, the strikes were a temporary political situation,” the contract seller said.
The propylene settlement at €910/tonne was not yet widely established since only two producers and one consumer had so far confirmed.
Traditionally, two different producers and consumers are required to confirm agreement for the contract to be considered fully done.
Remaining propylene contract participants were taking their time to assess the real impact of the strikes as there were still uncertainties when production might resume, in addition to the additional unexpected cracker problems.
“The feeling of tightness is there that’s clear and [it] will persist beyond 1 March,” said a major polyolefins producer, adding that the increment was much higher than it had expected.
However, it said it was also worthwhile remembering that while scheduled maintenance turnarounds had got, or would soon get, underway, several derivative shutdowns had also been planned around them and this would have a countering effect.
Other sources were taken aback as they had anticipated a much smaller increase.
“I am truly surprised by the settlement. I think its based on a panic reaction over the current tightness,” a key non-integrated consumer said.
“The tightness is not caused by a boom in demand, rather a supply issue. Its probably not a good enough reason [to increase contracts to that extent],” it added.
“Our demand is healthy, but normal. We expected a rollover to small €10/tonne increase” the consumer said.
It agreed that the market was tight but there had been some relief from the feedstock side, as well as the resumption of near normal services at European crackers as a whole.
“I will only proactively confirm a settlement when I believe it’s a realistic and justifiable settlement,” it said, and so for that reason declined to officially confirm the March contract price.
Sources said that due to time pressures, a different settlement was unlikely, but it would be interesting to see “who [amongst the consumers] would give in."
($1 = €.073)
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