10 June 2010 16:30 [Source: ICIS news]
PRAGUE (ICIS news)--The European ethylene (C2) and propylene (C3) markets are protected from a wealth of deep-sea volumes resulting from bearish sentiment in Asia due to a combination of the weak euro and the monthly contract price (MCP) system, market sources said on Thursday.
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Cargoes were potentially available from the Middle East,
However, although there has been little business concluded so far, it was only a matter of time before the situation changes, sources said.
“There are a lot of opportunities out there, even if no one is buying yet. It’s a signal to the market,” said a trader.
Buyers have been reluctant to risk bringing in large volumes, as the long lead times meant that delivery was usually within the next contract price period, which was indeterminable.
The previous three-month, or quarterly, contract pricing mechanism had afforded market players the opportunity to be more decisive when it came to spot activities, sources said.
The weak euro had also initially played a part in keeping the European markets a little “isolated”, they added.
The common European currency was favouring exports and was therefore helping to support derivative demand. But it had also meant that, at first, US dollar-denominated import volumes had not been attractive enough for buyers, although this situation was changing rapidly as ethylene prices in particular remained quite weak.
Logistical issues and a pronounced short-term outlook regarding supply and demand balances were also to blame for the lack of interest, traders said.
Recent planned and unplanned cracker and refinery maintenance projects in
The current lack of interest surrounding propylene cargoes was said to be simply down to a lack of space. There was some financial incentive but since some market observers were starting to anticipate that the next contract would settle lower, many had adopted a wait-and-see attitude.
Sources agreed that the global markets would eventually balance out and that it was Europe’s turn to follow developments in Asia and the
July contract discussions were expected to get under way in the next couple of weeks.
The settlements would be critical in terms of deciding whether European derivatives markets could continue to remain competitive given the price gap between
June ethylene settled at €970/tonne ($1,169/tonne) FD (free delivered) NWE (northwest
Ethylene spot prices were being pegged around €900-950/tonne on the pipeline, according to global chemical market intelligence service ICIS pricing.
This compared with Asian prices currently being assessed at around $900/tonne CFR (cost and freight) and prices in the
Coastal prices, however, were coming under some pressure from weaker levels elsewhere.
“With levels in
The first trader said: “I can sell at very, very low numbers in the north and in the Med and still make a very good margin.”
European propylene was being pegged around €900-950/tonne CIF (cost, insurance and freight) NWE at the coast and higher in the inland market.
Asian price ideas, however, were being reported this week around $1,000/tonne.
($1 = €0.83)
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