Spot ethylene, propylene prices soften on demand, availability

01 July 2011 13:49  [Source: ICIS news]

BASF cracker at AntwerpLONDON (ICIS)--Spot ethylene and propylene prices have fallen significantly over the past two months on poor demand from key derivatives polyethylene (PE) and polypropylene (PP) that has been weighing on supply, and there is further downside potential, market sources said on Friday.

Ethylene spot pipeline prices have dropped by around 33% since early May, when prices peaked at around €1,230/tonne ($1,783/tonne). Prices this week are recorded below €850/tonne FD (free delivered) NWE (northwest Europe).

Polymer grade propylene prices on the inland market have fallen by almost 18%. Prices peaked at €1,265/tonne FD NWE at the end of April, but are now in the mid-to-high €1,000s/tonne FD NWE.

Lengthening supplies due to a general reluctance to cut cracker operating rates too significantly because of healthy margins has meant that local suppliers have been forced to cut spot offers. Sellers said that they have been discounting heavily from contract prices, which recently settled at reductions of €95/tonne and €75/tonne for ethylene and propylene respectively.

Some sources said that cracker margins are such that producers can afford to cut prices further and that only containment issues will lead to more significant cracker reductions.

According to ICIS margin analysis, contract cracker margins based on naphtha feed rose to €741/tonne in the week ending 24 June. Average margins for June are the highest since December 2008.

Despite the softening spot numbers, Europe remains an attractive option for Middle East and Asian sellers unable to find their traditional outlet in Asia, and China in particular. Opportunistic buyers have had their pick of cargoes and are relishing the availability and weakening prices after months of increases.

Ethylene settled for July at €1,090/tonne, while propylene settled at €1,130/tonne. The contracts are agreed on an FD NWE basis.

($1 = €0.69)

For more on ethylene and propylene visit ICIS chemical intelligence
Click here to find out more on the European margin reports


By: Nel Weddle
+44 20 8652 3214



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