05 July 2010 16:06 [Source: ICIS news]
Correction: In the ICIS news story headlined “Europe Q2 cracker margins highest since Q4 2008” dated 5 July 2010, please read in the second paragraph … with margins pegged at €567/tonne … instead of … at €598/tonne…. A corrected story follows.
LONDON (ICIS news)--Average second quarter European contract cracker margins* are at their highest level since 2008, up by more than one and a half times compared with the second quarter of 2009, ICIS pricing analysis shows.
Second quarter 2010 contract naphtha margins were assessed at €416/tonne ($520/tonne), up by €129/tonne from the first quarter, but July started out on a very strong note with margins pegged at €567/tonne in the week ending 2 July.
A fall in naphtha feedstock prices was accompanied by a 1.9% weakening of the US dollar against the euro and more than made up for the €12/tonne decrease recently concluded in July contract negotiations.
During the discussions, sellers had been fighting consumer calls for a decrease because of a balanced to tight supply and demand situation, but buyers’ fears over competition from derivatives out of the currently weaker markets of Asia and the US won out and the contract concluded at €958/tonne FD (free delivered) NWE (northwest Europe).
Spot margins were also very healthy, which meant cracker operators would continue to run crackers at high rates. Although there was downwards pressure on spot prices because of cheaper imports, those buyers needing prompt volume and/or those without logistics flexibility still had to pay around contract price for product originating from ?xml:namespace>
Demand in July was expected to be robust, but there were concerns that August could be weaker as cheaper Asian and US ethylene derivatives displace European volume.
*The assessment provides the ex-works margin obtained for this product, expressed per tonne ethylene, over raw material costs and key variable manufacturing costs such as power and steam.
($1 = €0.80)
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