Petrochemicals: Margins spread widen in Europe

04 June 2012 00:00  [Source: ICB]

Ethylene margins based on naphtha feedstock in Europe are showing the widest spread between contract and spot since the global financial crisis of late 2008, ICIS weekly margin reports have revealed.

Variable contract margin calculations last week climbed to as much as €828/tonne ($1,036/tonne), whereas spot margins were at a lowly €339/tonne.

The spread has reached a peak of almost €490/tonne - the largest since December 2008, when spot margins collapsed to an average €223/tonne and contract margins (based on a quarterly ethylene contract price) soared to almost €1300/tonne, yielding a difference of almost €1,070/tonne, the biggest seen this millennium.

Contract margins rose in the last week of May, with naphtha feedstock costs - in euro terms - falling by almost 20% from their peak in March and the ethylene contract price in April just below its all time high of €1345/tonne.

Spot margins have averaged around €360/tonne for the month.

However, there is a sign of the gap closing, with the June ethylene contract price settled at a three-digit price drop, down by €120/tonne to €1,205/tonne. This significant decrease largely reflects reduced demand and weak upstream crude oil and naphtha markets.

Author: Afsar Hussain

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