21 January 2011 23:59 [Source: ICIS news]
LONDON (ICIS)--European ethylene oxide (EO) contract prices rose by at least €86/tonne ($116/tonne) in January due to firmer feedstock costs and balanced-to-tight supply, market players said on Friday.
Formula-related contracts increased by €86/tonne in January, in line with an average 82% of the ethylene feedstock movement.
On top of this, formula contracts, which were re-negotiated for 2011, saw fee increases of €50-100/tonne, according to some players. This was attributed to strong market fundamentals and the ongoing need for margin recovery. Rollovers and decreases of €40/tonne were also heard in a few cases, depending on source, settlement time and starting point.
However, other major players said that their contract terms were still valid and were not subject to any changes to their fees. As the fee adjustments were only for certain players, they were therefore not seen to reflect the general trend in the market.
For freely negotiated volumes, some buyers and sellers confirmed that larger increases of €25-50/tonne above the formula move were possible in January due to limited supply flexibility. However, this was contested by one customer, who said it had managed to source supplementary volumes in January at the same level as the formula increase.
Players were not prepared to comment on exact numbers, but quoted prices ranging from the low-to-mid €1,200s/tonne FD (free delivered) NWE (northwest Europe) and up to €1,300/tonne FD NWE.
Taking into account the formula and freely negotiated movements, the range was increased to €1,223-1,300/tonne FD NWE. This represented an increase of €86/tonne at the low-end, typically reflective of formula contracts. However, the upper-end was assessed up by €118/tonne in total, taking into account €32/tonne above the formula increase.
Larger hikes were reported by a few sellers, but these were not widely confirmed in the market.
EO contract prices in the Mediterranean also increased in the same magnitude as in NWE, taking values to €1,263-1,330/tonne FD Med (Mediterranean).
The market was described as balanced-to-tight, depending on the source. Sellers said there were some supply limitations, due to ongoing good demand across all sectors, EO capacity losses last year and forthcoming plant maintenances.
Customers, however, said that contracts were sufficiently covered with no availability problems. Supplementary spot volumes were deemed difficult to obtain, although one customer said it was still possible.
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