Europe June EO prices fall on feedstock costs

10 June 2011 23:59  [Source: ICIS news]

LONDON (ICIS)--European ethylene oxide (EO) contract prices for June have fallen from May, mainly driven by lower costs of the feedstock ethylene, market players said on Friday.

This marks the end of a seven-month run in EO price increases that was the result of higher feedstock prices and some supply constraints, which were caused by plant outages and good demand for EO.

EO formula-related contract prices in June fell by €37/tonne ($54/tonne) from May, in line with €45/tonne month-on-month drop in the June ethylene contract price.

For freely negotiated accounts, sources largely confirmed price decreases for June, although there was some variation about the magnitude of the reductions.

Buyers said price decreases in June were similar to those for formula accounts, because of slightly slower demand and generally improved supply.

Some sellers said they had agreed to price decreases for freely negotiated business in June, but to a lesser extent than the formula-related reductions, citing good demand and balanced-to-tight supply as moderating factors.

However, a producer said it had secured a rollover in prices for its freely negotiated accounts in June. But this was not widely confirmed by other sources.

To reflect the mix of contract types, EO contract prices were assessed between €1,2851,444/tonne in NWE (northwest Europe) and €1,3251,474/tonne FD (free delivered) Mediterranean. The prices represent the formula-related reduction of €37/tonne at the low end of the range and a decrease of €25/tonne at the upper end, which broadly reflected the freely negotiated business.

Sources' views on market fundamentals differed widely. Sellers maintained that supply is still tight because of good demand, some possible production problems and forthcoming plant outages.

Customers, however, said there is a more comfortable supply position compared with the past few months.

This is despite possible production difficulties for a few players, which are thought to be offset by lower-than-expected demand from the downstream surfactants sector. The latter is thought to be the result of limited buying activity amid upstream price volatility, as well as fewer export opportunities, particularly because of some signs of a slowdown in parts of Asia.

In production news, sources speculated about possible restart difficulties at BASF’s 345,000 tonne/year EO facility at Ludwigshafen, Germany, following planned maintenance that began in May. The company was unavailable to comment on this.

Buyers said they had not seen any impact on the merchant market, stating that this is offset by mainly captive consumption at the site and generally lower downstream demand.

BASF’s EO and monoethylene glycol (MEG) units at Antwerp, Belgium, are expected to undergo planned maintenance in September. The nameplate capacities are 500,000 tonnes/year for the EO unit and 360,000 tonnes/year for the MEG unit, according to ICIS data.

INEOS Oxide is to carry out planned maintenance at its EO and MEG units at Cologne, Germany, at the end of June for approximately two to three weeks, said a company source. The site produces up to 290,000 tonnes/year for EO and 175,000 tonnes/year for MEG, according to ICIS data.

Clariant will carry out planned maintenance at its EO and MEG facilities at Gendorf, Germany, in October/November, said a company source.

($1 = €0.69)

By: Heidi Finch
+44 20 8652 3214

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