High Europe ethylene may open EG arbitration window from US Gulf

09 March 2012 19:13  [Source: ICIS news]

MEDELLIN, Colombia (ICIS)--Recent cracker outages in Europe and high-priced ethylene could open an arbitration window and allow US producers to move excess ethylene glycol (EG) to Europe, market players said on Friday.

“The situation with a cracker off line in Europe and high ethylene cost from naphtha is ripe to move excess US production,” a US trader said. However, the window is not open yet, he added.

There are reports of trade weighing up the possibility of shipping 3,000-5,000 tonnes of EG in March from the US to Europe.

Europe is a net importer that has been void of imports for weeks.

European monoethylene glycol (MEG) buyers will not take a position if the gap between cost insurance freight (CIF) and free carrier (FCA) is too small, which it is at the moment, a supplier said.

Both truck and bulk prices are around €900/tonne ($1,200/tonne) FCA and CIF NWE (northwest Europe), according to ICIS.

The unplanned outage at INEOS’s No 4 cracker at Cologne in Germany in mid-February led to force majeure (FM) declarations on ethylene and propylene supplies. Shell did the same on 1 March at its Moerdijk cracker in the Netherlands.

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

Markets in the US and Europe are quiet this week amid divergent price ideas for March in the US and European buyers waiting on the sidelines.

There are production problems upstream and maintenance shutdowns due in Europe just as the traditional downstream polyethylene terephthalate (PET) bottling season should kick in. These factors point to the need for more MEG.

Buyers acknowledge that production costs have gone up, but at parity with Asia, and the European spot situation requires a less bullish stance in European contract discussions.

Supply and demand in the European ethylene market is starting to re-balance this week following the resumption of production at one cracker, improved rates at other crackers and a healthy level of imports from the Middle East, market sources said.

In the US, EG contract values were assessed unchanged this week, as price ideas for March were said to be split and the market quiet. Industrial-grade ethylene glycol (EGI) was assessed at 53-55 cents/lb for February contracts.

There was talk that EG for March would be priced down 1 cent/lb. However, some buyers and sellers said prices would roll over from February levels.

A producer reduced its March benchmarks by 2 cents/lb for EG, but other producers said the discount was a move to catch up in March to where the spot market is already sitting. 

Major EG suppliers in the US include LyondellBasell, Huntsman, MEGlobal, Old World, SABIC and Shell. Major EG producers in Europe include BASF, Shell and INEOS Oxide.

Additional reporting by Caroline Murray

($1 = €0.75)


By: Leela Landress
+1 713 525 2653



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