07 July 2010 17:49 [Source: ICIS news]
LONDON (ICIS news)--European ethylene (C2) spot is currently much cheaper than fixed contract volumes as higher prices in Europe attract product from the Middle East in preference to the weaker US and Asian markets, market sources said on Wednesday.
There was currently as much as a €200/tonne ($253/tonne) difference between spot deep-sea and contract prices, according to ICIS price assessments, and the mismatch was growing as the availability of spot volumes had improved substantially over the past few weeks.
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In contrast, Asian ethylene prices had failed to pick up, although sources speculated about the potential impact on Asian prices of a recent explosion at a cracker in
“The explosion in
US volumes on the other hand were being used to meet demand from
Consequently, Middle Eastern countries such as
Iranian volumes was recently sold into Europe at around $1,000/tonne CIF (cost insurance freight), but tonnes ex-Rabigh in
In the Mediterranean region, Libyan volumes had been sold at $950/tonne CFR (cost and freight)
This compared with the July contract price of €958/tonne FD (free delivered) NWE, equivalent today to $1,213/tonne.
However, as only a limited few Euroean buyers had the logistical capability to procure large, deep-sea volumes, inland consumers who were supplied via pipeline were still faced with firm pipeline spot prices as these were being pegged at around contract value.
Some sources also said that a number of unplanned production issues had meant the inland market was tight, despite the wealth of deep-sea volumes on offer.
“The market in
Another trader said there was no flexibility in the European production system, so every little hiccup however minor had a big impact.
“If you can wait 4-6 weeks for volume then you can take advantage of the cheap pricing of deep-sea tonnes,” said the producer.
Market sources agreed that demand for ethylene was still healthy and that there were no signs that it was faltering yet.
The producer said some of its buyers were asking for additional tonnes in July and even in August, but uncertainty over when new
“Nobody dares to do too much in advance” it said.
($1 = €0.79)
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