27 April 2012 10:58 [Source: ICIS news]
LONDON (ICIS)--The initial European propylene contract price for May has been agreed at €1,230/tonne ($1,618/tonne) free delivered (FD) northwest Europe (NWE), down by €15/tonne from the previous month, one main producer said on Friday.
The main producer said “it is a rational and fair settlement balancing the softer trend in upstream naphtha costs during the month with demand uncertainty”.
The initial settlement was between one major producer and one pure consumer, although confirmation was still pending from the buyer at the time of writing.
Producers were trying to hold out for a rollover because they are aware of heightened upstream volatility and the poor contract margins over recent months, despite a softer tone in the upstream naphtha market over the last month.
Sellers were also reluctant to give a negative signal to the downstream markets. However, the settling producer said that the initial settlement was taking into account cracker margin recovery, as well as supporting downstream markets.
Buyers, on the other hand, were keen to push for decreases because of upstream feedstock relief, fragile downstream demand and lengthier propylene supply.
A few consumers said they were not prepared to follow the initial settlement, stating that the reduction was not sufficient. They were looking for larger reductions of at least €20-30/tonne.
One customer said that even a decrease of €20/tonne would be “a compromise” taking into account the average reduction in upstream naphtha costs in euro terms over the last month, in addition to the lengthier supply situation.
($1 = €0.76)
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