Europe August olefins CP hikes improve cracker margins by 48%

06 August 2012 15:46  [Source: ICIS news]

LONDON (ICIS)--European contract cracker margins based on naphtha feedstock have risen by almost half compared with the margin average for July, on the back of the steep increases in the ethylene and propylene contract prices for August, ICIS margin analysis showed on Monday.

The margin improvement would have been higher but for a 6.4% increase in naphtha costs in euro terms.

The July margin average of €241/tonne – the lowest since January – was the primary factor behind olefins producers’ hard stance in targeting significant increases for the August contract prices.

Having ceded a drop of €290/tonne for ethylene from May to July as the energy complex softened and in an attempt to boost demand, producers were adamant that as much as possible of the rapid rebound in upstream values through July would be recovered, despite August being traditionally the quietest month because of summer holidays. 

Sources said it was too early to determine the impact of the higher contract prices on demand but derivatives producers were concerned that demand would hit its nadir.

Spot margins based on naphtha reversed the trend of the past couple of weeks and plunged by more than €100/tonne on the back of the feedstock increase as spot ethylene prices were stable in dollar terms. Co-product credits strengthened by 2.6%.

Contract cracker margins based on liquefied petroleum gas (LPG) increased by €106/tonne, largely on the higher ethylene contract price and an 8.8% hike in co-product credits.

Ethylene settled at €1,175/tonne ($1,451/tonne), up by €140/tonne from July. Propylene settled at €1,055/tonne, up by €120/tonne.

The contracts are agreed on a free delivered (FD) northwest Europe (NWE) basis.

European cracker margins 6 August 2012

($1 = €0.81)

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By: Nel Weddle
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