Europe cracker margins surge by 27% on soft naphtha

20 September 2010 16:33  [Source: ICIS news]

By Nel Weddle

Europe cracker margins surge by 27%LONDON (ICIS)--European cracker contract margins have surged by 27% because of a 5.8% drop in feedstock naphtha values, ICIS margin analysis showed on Monday.

A $24/tonne (€18/tonne) fall in naphtha in the week ending 17 September was exacerbated by a 2.5% weakening of the US dollar versus the euro. Co-product values were relatively flat.

This brought the September average contract naphtha margin to date to €428/tonne, just shy of the August average at €440/tonne.

The third quarter contract margin average was shaping up to be the most profitable quarter since 2008.

Spot margins were similarly improved, rising by €74/tonne, but the September average to date of €284/tonne was way behind the best month - May - when spot margins had reached the heady heights of €503/tonne due to a number of  planned and unplanned cracker shutdowns.

Europe cracker margins up by 27% on soft naphtha

The vast majority of European crackers were currently running well and at maximum rates, sources said. Demand for both ethylene (C2) and propylene (C3) was robust and most market sources expected this to remain the case through October.

However, players were cautious how year-end stock management issues and the threat of the new capacities on ethylene and derivatives would impact on operating rates and margins in November and December.

October monthly contract dicussions for C2 and C3 were expected to get underway towards the end of this week.

Ethylene and propylene settled at €950/tonne and €930/tonne for September respectively.

Few sources were willing to divulge their contract price ideas this early in the negotiation process, but several market observers were not envisaging any major adjustments.

The contracts settle on a free delivered (FD) northwest Europe (NWE) basis.

($1 = €0.77)

For more on ethylene, propylene visit ICIS chemical intelligence
Click here to find out more on the European margin reports
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By: Nel Weddle
+44 20 8652 3214



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