12 September 2011 15:58 [Source: ICIS news]
LONDON (ICIS)--European ethylene cracker margins are being heavily influenced by the strength of the US dollar, according to ICIS margin analysis on Monday.
Despite an $11/tonne (€8/tonne) drop in naphtha prices, a 3.9% strengthening of the US dollar against the euro meant that contract margins fell by €37/tonne in the week ending on 9 September.
The contract margin average for September currently stands at €438/tonne, €141/tonne or nearly 25% below the margin average for August. Margins had only just recovered in August on a combination of lower naphtha and a €30/tonne increase in the ethylene contract price.
Spot ethylene margins are down by €49/tonne to €268/tonne. The drop could have been more but for the fact that US dollar-based spot ethylene prices on a cost, insurance and freight (CIF) basis remain steady.
The weak performance of ethylene derivatives, notably polyethylene (PE), has led to cracker operating rates being trimmed and supply and demand are currently well balanced.
European producers readily admit that underlying demand is “not what it was before”, but add that it is becoming increasingly difficult to manage an industry that is subject to such volatility in both the upstream and foreign exchange markets.
“We don’t have the possibility to increase production in either olefins or polyolefins, our big battle is with the volatility of naphtha and the euro, US dollar exchange rate,” said a major producer.
The September ethylene contract price settled at €1,115/tonne FD (free delivered) NWE (northwest Europe), down by €5/tonne from August.
($1 = €0.73)
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