24 March 2010 16:40 [Source: ICIS news]
LONDON (ICIS news)--European ethylene (C2) and propylene (C3) contract negotiations for April are under way, however progress has been slow as the buying and selling ranges were quite wide at the start of discussions, market sources said on Wednesday.
For ethylene, contract parties were targeting a rollover to an increase of €40/tonne ($54/tonne). The March ethylene contract had settled at €940/tonne, a rollover from February.
On propylene, stronger gains were expected as supply and demand was very tight as a result of planned and unplanned production outages amid strong demand for derivative exports.
Sources pinpointed a talking range of between plus €50/tonne and plus €100/tonne. Last month the March propylene contract settled at €910/tonne, up by €35/tonne from February.
Some sources said that the sticking point hindering the settlement process was propylene as there was a strong possibility that it could rise above ethylene for the first time since global chemical market intelligence service ICIS pricing records began 24 years ago.
Traditionally, ethylene has commanded the highest value out of the two, since it is produced in roughly a 2:1 ratio from a naphtha-fed steam cracker and hence the ethylene margin was the main driver of cracker operations.
“For C3, the increase will be significant,” a major propylene producer said, adding that it expected; “the C3 increase at least €50/tonne over the C2 increase.”
There were only two occasions in recent years when ethylene and propylene contract values were at parity – in the third quarter of 2005 when both settled at €640/tonne, and in the first quarter of 2006 when both settled at €785/tonne.
The contracts are settled on a free delivered (FD) northwest Europe (NWE) basis and are subject to discounts.
“There is still a gap on both products, relatively small but still there,” a key olefins producer said.
The discussions continue.
($1 = €0.74)
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