09 November 2012 11:34 [Source: ICB]
European ethylene and propylene contract prices for November have been established largely in line with market expectations, at decreases of €15/tonne ($19/tonne) and €20/tonne respectively, reflecting soft upstream and downstream fundamentals, market sources say.
The ethylene contract price was the first to settle - at €1,275/tonne FD (free delivered) NWE (northwest Europe) - with confirmation from two major olefins producers and three key non-integrated consumers.
There had been some expectation that ethylene would either roll over or match the €10/tonne downwards adjustment seen for October. The first settling consumer said: "There was a strong push for a rollover, but buyers wanted a higher decrease. In the end common sense and the nearing month-end helped [us] come to a compromise."
Another source said: "That's more than I expected actually, [I] guess market pressure is playing."
The propylene settlement soon followed at €1,120/tonne FD NWE. The initial settlement was between a major non-integrated consumer and one of its suppliers, an olefins producer not previously in a position to actively settle benchmark contract prices.
A second propylene producer then followed with a second non-integrated consumer. However, direct confirmation from this producer to ICIS is still pending.
Sources said feedstock values were stable to soft. This had given support to buyers who had targeted decreases on the back of waning demand because of a lack of competitiveness with other regions and ongoing economy worries, as well as the traditional year-end slow-down.
Producers had been keen on a rollover for both ethylene and propylene, citing a balanced supply and demand scenario and the view that stability would be the best option given the other uncertainties surrounding the global economy.
Several players suggested December negotiations would likely prove more challenging but this would depend on the demand pattern in November.
A few sources said there had already been notable softening in some downstream areas, but sellers said demand was better than during the same period last year. Tight inventory management throughout the chain in 2012 - low demand and cracker rates - has kept supply and demand under control.
"[There are] no big surprises on the horizon," one olefins producer said.
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