25 May 2010 16:16 [Source: ICIS news]
LONDON (ICIS news)--An initial European ethylene (C2) contract for June has been agreed at €970/tonne ($1,197/tonne), up €10/tonne from May, a major olefins producer said on Tuesday.
The contract, which followed hot on the heels of the first propylene (C3) settlements, was done on a free delivered (FD) northwest Europe (NWE) basis and was between the producer and one of its customers, a major polyvinyl chloride (PVC) producer.
Confirmation from the customer was still pending.
Ethylene had tightened in recent weeks on the back of supply constraints because of unplanned cracker problems. Spot prices had risen to the mid €900s/tonne on the pipeline – close to the May contract value of €960/tonne, and some spot volumes had been secured at very high prices well in excess of the contract, according to global chemical market intelligence service ICIS pricing.
As news of the initial settlement broke, some sources said they were surprised that an increase could be secured since the recent weakness of the energy complex meant that cracker margins were very good.
According to ICIS data, contract naphtha margins climbed by €118/tonne to their highest value since late 2008 in the week ending 21 May, because of a $52/tonne fall in naphtha values and a 1.4% weakening of the dollar versus the euro. Spot naphtha margins meanwhile were at their highest level since October 2008.
“With a massive fall in naphtha prices, these guys do have brass necks,” a plastics trader said. “But I take my hat off to them - it may be shameless but they are making a fortune.”
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