Europe May EO contract prices mainly firming on costs

20 May 2011 23:59  [Source: ICIS news]

LONDON (ICIS)--European ethylene oxide (EO) contract prices in May largely have increased by close to €21/tonne, driven by firmer feedstock costs, market players said on Friday.

The increase has taken May EO contract values to €1,322-1,469/tonne ($1,889-2,099/tonne) FD (free delivered) NWE (northwest Europe) and €1,362-1,499/tonne FD Mediterranean, according to ICIS.

Formula-related EO contracts moved up by €20.5/tonne in May, in line with an average 82% of the ethylene feedstock movement.

Premiums of €15-50/tonne for freely negotiated business were reported by some producers, due to balanced-to-tight supply. However, there has been insufficient market confirmation to substantiate the larger rises.

However, buyers and other sellers said that there had been a similar pricing trend for formula and freely negotiated EO accounts in May, on the back of improved supply over the past month, and the context of successive increases over the past seven months.

In addition, for those players who are currently in the process of, or are due to, renew their contract conditions, larger hikes of €75-80/tonne were being discussed.

This is thought to be due to favourable returns for alternative derivatives such as mono ethylene glycol (MEG), as well as the consolidated European EO supply, following recent capacity losses and increased captive consumption for certain players.

However, the larger hikes for the renewal of contracts are not seen to relfect the general market trend for monthly business, due to the fragmented and staggered nature of the renewal process.

The EO market is balanced-to-tight, with some improvement noted compared to a month ago, following the end of a heavy concentration of plant/facility outages.

Demand is described as fairly regular at a healthy level, although a few customers reported a slight reduction in activity from the downstream surfactants sector.

Possible reasons for this include intensified downstream compeition and fewer export opportunities, due to the unfavourable euro/dollar exchange rate and signs of more subdued demand in Asia, thought to be due to stricter fiscal measures.

($1 = €0.70)

By: Heidi Finch
+44 20 8652 3214

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