Ethylene supply-demand balance to improve moving through March

09 March 2012 14:12  [Source: ICIS news]

BalanceLONDON (ICIS)--Supply and demand in the European ethylene market is already starting to re-balance following the resumption of production at one cracker after an unplanned outage, improved rates at other crackers and a healthy level of imports from the Middle East, market sources said on Friday.

“The panic is over,” one ethylene producer said.

“It’s balancing out a bit, plants are running better,” a second producer added.

The unplanned outage at INEOS’s No 4 cracker at Cologne in Germany in mid-February led to force majeure declarations on ethylene and propylene supplies.

Shell was forced to do the same on 1 March, when its Moerdijk, Netherlands cracker experienced an “unforeseen increase in fouling”.

These outages came at a time when there was little-to-no flexibility in any producer system.

Some crackers were just recovering after having been affected by weather-related constraints, while others were still closely aligning production with demand and keeping a tight reign on inventories.

Tightening supply saw spot numbers on the pipeline soaring above the prevailing record March contract price of €1,305/tonne ($1,740/tonne) with record-high levels of as much as €1,3501,375/tonne FD (free delivered) NWE (northwest Europe) having been mooted.

High European prices since January had already been attracting deep-sea tonnes, notably from Saudi Arabia, as these give a better netback compared with Asia.

The developments over the past couple of weeks saw Indonesian and Taiwanese tonnes also being fixed to Europe, according to traders.

Deep-sea spot numbers had been talked in the high $1,600s/tonne to low $1,700s/tonne on a CIF (cost, insurance and freight) NWE basis.

However, the INEOS cracker was said to be running again this week, although this has not been officially confirmed. The forces majeures are still thought to be in place.

“High prices were cited last week and maybe at the very beginning of this week” the first ethylene producer said, adding that nobody could really pay these numbers to support derivatives markets as it does not make sense.

The few sellers interested in straight sales last week, were now more attuned to concluding time swaps, which sources said highlighted the turnaround in sentiment.

A third ethylene seller said that it had some free volumes available in the second half of March but that it had not “been able to move it even mid-low $1,600s/tonne.”

($1 = €0.75)

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By: Nel Weddle
+44 20 8652 3214

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