08 May 2012 15:35 [Source: ICIS news]
LONDON (ICIS)--European cracker margins based on naphtha feedstock have soared by about 19%, to their highest since June 2011, because of weak naphtha prices and despite a €20/tonne ($26/tonne) drop in the May ethylene contract price, according to ICIS margin analysis on Tuesday.
In the week ending 4 May, euro-based naphtha costs fell by 5.9%. Naphtha prices were down by $70/tonne, on the back of mounting concern over the global economy, but a 1.2% strengthening of the dollar offset the full benefit.
Spot margins were also much improved, up by €149/tonne week-on-week, although this was solely because of the stronger dollar. Spot prices are very weak relative to contract prices, reflecting the supply-demand imbalance being seen in ?xml:namespace>
Margins based on liquefied petroleum gas (LPG) feedstock are at their highest since December 2008, because of an 8.2% reduction in LPG costs. Some cracker operators will be utilising LPG feedstock as far as is technically possible, which will help to reduce lengthy propylene supplies.
Cracker margins have been on an upward trend since mid-April and this is fuelling further disappointment on the part of ethylene derivative producers, who thought the €20/tonne decrease in the May ethylene contract price unsatisfactory and unfair.
The latest figures will add weight to some market expectations that a bigger downward adjustment will be likely for the June contract price.
The May ethylene contract price settled at €1,325/tonne FD (free delivered) NWE (northwest
($1 = €0.77)
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