Europe July EO prices fall €139/tonne on record drop in ethylene

13 July 2012 23:59  [Source: ICIS news]

LONDON (ICIS)--European July ethylene oxide (EO) contract prices were assessed down by €139/tonne ($170/tonne) on Friday, based on the record €170/tonne fall in the July ethylene contract.

July EO contract prices were assessed by ICIS at €1,165–1,332/tonne FD (free delivered) NWE (northwest Europe) and €1,205–1,362/tonne FD MED (Mediterranean).

Nearly all EO contracts are formula-based, and price movement comprises 80-85% of the change in the monthly ethylene price, with 82% taken as an average for assessment purposes.

Freely negotiated contract business represents only a small percentage of the European market. Since the beginning of 2012, there has been little divergence between formula-based and freely negotiated contracts.

Some market participants said that, as a result of the price fall, demand for EO has started to rise, following several months of persistent weakness.

A buyer involved in the surfactants market said that EO demand has significantly improved in July, and suggested that producers of derivative products are taking advantage of the sharp fall in prices to re-stock. The market remains well-supplied, the buyer noted.

Around the end of June, producers started to indicate that demand was beginning to improve for certain downstream applications, excluding monoethylene glycol (MEG).

At the time, this was not confirmed on the buy side, where sources emphasised the weak macroeconomic environment and the approach of summer, which is usually a quiet season for EO.

EO offtake in 2012 has been significantly lower than in previous years, on account of poor performance in many downstream sectors, which have been undermined by macroeconomic concerns.

Surfactants were previously described by market participants as being more resistant to the economic downturn than other sectors.

Consumption in the highly seasonal agro-chemicals industry is expected to increase from September.

It remains to be seen whether sectors heavily dependent on the lacklustre construction industry, such as plasticisers, and paints and coatings, experience any significant recovery.

European EO producers include Shell, INEOS Oxide, BASF, Clariant, Sasol, Dow Chemical, IQA, PKN Orlen and AkzoNobel.

($1 = €0.82)

By: Samuel Weatherlake
+44 20 8652 3214

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