Europe August EO contracts up by €115/tonne on ethylene hike

17 August 2012 23:59  [Source: ICIS news]

LONDON (ICIS)--European ethylene oxide (EO) August contract prices were assessed up by ICIS by €115/tonne ($142/tonne) from July this week, based on the €140/tonne rise in the August ethylene price.

August EO contract prices were assessed by ICIS at €1,280–1,447/tonne FD (free delivered) NWE (northwest Europe) and €1,320–1,477/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 the year, freely negotiated contracts have closely tracked formula-related business.

Market participants described a more positive demand picture this week, in spite of the increased prices.

A producer said that demand was more robust than it had expected, given the continuing eurozone debt crisis. The source suggested that shutdowns at EO plants might be partly responsible for this.

A buyer also described good demand, particularly for surfactants.

Buying activity picked up in July, but this had been widely attributed to the impact of the record drop in ethylene costs.

Demand for most derivative products has been poor this year on account of continuing macroeconomic concerns.

Surfactants has performed relatively well, because this sector represents a broad range of consumer products.

Demand from the highly seasonal agro-chemical sector is expected to pick up from next month.

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

($1 = €0.81)

By: Samuel Weatherlake
+44 20 8652 3214

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