UpdateEurope Sept propylene fully confirmed up by €105/tonne

31 August 2012 12:56  [Source: ICIS news]

LONDON (ICIS)--The European monthly propylene contract price (MCP) for September has been fully agreed at €1,160/tonne ($1,450/tonne), up by €105/tonne from August following further seller support on Friday.

The initial MCP settlement, which was agreed on an free delivered (FD) northwest Europe (NWE) basis, was reached between one main producer and one net consumer. This was then followed by a second consumer and a second producer.

Another buyer had agreed the same number with the second settling seller. Meanwhile, a third producer had followed this settlement with the buyer who was involved in the initial settlement.

Both customers and sellers acknowledged that a price increase was necessary in September in view of the recent spike in upstream naphtha costs and the need to recoup cracker margin losses.

While sellers initial starting positions were plus €140-150/tonne and above for economic reasons, buyers were looking to limit price increases to €100/tonne for the sake of demand and derivative competitiveness with other regions.

News of the €25/tonne reduction in the butadiene MCP for September, which was agreed at €1,550/tonne FD NWE on Wednesday, had also made MCP price discussions  for ethylene and propylene even more difficult and protracted this month, because it further impacted already poor cracker margins.

It was, however, generally expected that the price increase for propylene would be slightly less than for ethylene. This is because propylene is more readily available than for ethylene and spot values have been lagging behind the contract level to a greater extent that for ethylene over the last month.

The ethylene contract price for September settled up by €125/tonne at €1,300/tonne FD NWE earlier this morning and this was later followed by the increase of €105/tonne for the European propylene conrract price.

One producer, however, said it had wanted to have a similar level of increase for both ethylene and propylene, stating that the propylene contract price was already lower than for ethylene and it had wanted to close the gap between them.

It also contested the view of others that the propylene market, in particular for polymer grade propylene (PGP), was considered to be slightly softer than for ethylene. However, it said it had agreed to the plus €105/tonne as a “compromise”.

($1 = €0.80)

By: Heidi Finch
+44 20 8652 3214

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