Soft Asia market causes European C2 spot prices to fall

18 March 2011 14:34  [Source: ICIS news]

LONDON (ICIS)--European ethylene (C2) spot prices are coming under downwards pressure as Asian and Middle East sellers eye Europe amid weakening prices in Asia, market sources said on Friday.

One seller was “a little disturbed” about the reversal in the trend, having found it increasingly difficult to sell volumes either on the Aethylen Rohrleitungs Gesellschaft (ARG) pipeline or at the coast.

“I did not find any interested parties,” the seller said, adding that buying interest is thin because the buyers had no room, had already covered needs at lower prices or were waiting for even weaker prices.

European sources were surprised the Asian market was soft and said this was contrary to expectations earlier this week.

Four crackers were shut down in Japan following the massive earthquake and tsunami last week. But Japan's position as a net exporter of ethylene had led to expectations of a greater impact on pricing and supply in the region.

However, demand, especially from the polyethylene (PE) sector in China, has been slow in recent weeks and maintenance at regional derivative plants has also been having a negative effect.

“Nobody wants to talk prices or offer material. China demand is dropping fast,” one trader said, adding: “With SEA [southeast Asia] not really hungry, the European market may suddenly become an interesting outlet.”

A second trader said: “[There is] no demand from southeast Asia and surplus Middle East volume; consumer sentiment is bearish. I am now hearing [it’s] bearish in Europe.”

A third trader thought the Middle East would look west, “now that Asia is $1,200/tonne [€852/tonne] CFR [cost and freight].”

A 9,000–­10,000 tonne Taiwanese ethylene cargo, loading 15–20 March, was completely sold in Europe. However, the trader involved agreed there was “not a lot of interest right now for buying more C2 in Europe [for April].”

Spot prices of around $1,500/tonne were being quoted on a CIF (cost insurance freight) NWE (northwest Europe) basis for the remainder of March and April deliveries. This compared with prices of more than $1,600/tonne only a couple of weeks ago.

However, levels of $1,575–1,600/tonne CIF NWE were still representative, one source said, because the exchange rate was providing some support.

Pipeline prices were reported in the low €1,100s/tonne on an FD (free delivered) basis. Until now, pipeline prices had been quoted at, or close to, the prevailing contract price.

March contract prices settled at €1,195/tonne FD NWE, up by €60/tonne from February. Discussions for April contracts were expected to begin next week.

In the Mediterranean, prices are being indicated below $1,500/tonne CIF Med. Iranian and Turkish product was weighing on sentiment, according to some sources.

Leading Turkish petrochemical company Petkim had issued a sales tender last week for 4,000-5,000 tonnes of ethylene, closing 11 March, but the producer said it had been “called back”.

The reasons for this were not disclosed but market players speculated that the bids had not been high enough. There were questions over whether the volume had, in fact, been sold directly to a Med consumer instead.

“So far Europe has been the best [priced], but how long will it last?” one trader said.

($1 = €0.71)

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By: Nel Weddle
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