UpdateEurope April propylene fully confirmed up at €980/tonne

26 March 2010 15:24  [Source: ICIS news]

(Adds market opinion throughout) 

LONDON (ICIS news)--The April European propylene (C3) contract has been fully confirmed up by €70/tonne ($93/tonne) from March at €980/tonne, following some initial buyer resistance, said a third producer and a second consumer on Friday.

The contract was agreed on a free delivered (FD) northwest Europe (NWE) basis.

The second consumer said it had accepted the €70/tonne increase reluctantly, adding that it had not thought the price would change given the short supply situation.

“The feeling is there should have been a lower settlement [on the buy side], and there should have been concessions on the sell side. But we wanted to finalise this. Having hurt feelings doesn’t help market clarity,” said the consumer. 

Two other customers had refused to follow the settlement officially, as they had considered the rise of €70/tonne too high.

Customers stressed that prices had moved up steeply since the start of 2010, and they would have difficulty in passing on the increases downstream.

Including the April increase, European propylene contract prices have increased by a total of €230/tonne during the January-April 2010 period.

“Propylene has moved above ethylene for the first time [since ICIS records began in 1986], it is not acceptable,” said one customer.

Consumers had initially started discussions at plus €50/tonne, and one said it had been prepared to accept plus €60-65/tonne as a compromise.

Sellers, however, stood firm on the plus €70/tonne due to the low stock position and firm naphtha costs. One of the producers said that the strong firming tendency on the spot side was justification for the contract level.

On 25 March, an initial propylene settlement was reached by one producer and one of its customers, a major net consumer. This was then followed by a further agreement between another supplier and the same customer.

Traditionally, two different producers and two different consumers are required to confirm before the settlement is considered a representative benchmark market price.

($1 = €0.75)

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By: Heidi Finch
+44 20 8652 3214

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