Europe December EO contract prices stable on ethylene rollover

14 December 2012 23:59  [Source: ICIS news]

LONDON (ICIS)--European ethylene oxide (EO) December contract prices were assessed by ICIS at a rollover from November on Friday, based on the unchanged ethylene contract price for December.

December EO contract prices were assessed at €1,363–1,530/tonne ($1,791–2,013/tonne) FD (free delivered) NWE (northwest Europe) and €1,403–1,560/tonne ($1,846–2,053/tonne) FD MED (Mediterranean).

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

Freely negotiated contracts now represent only a small proportion of the market, and usually move in line with formula-based pricing.

A producer said its conversion fees, or adders, for purified EO will increase by an average of €60-70/tonne in 2013.

This was a larger amount than most sources had indicated would be applicable for deliveries in northwest Europe, but was closer to the average increase estimated for southern Europe.

The producer described good demand for the time of year, which it attributed to strong performance in the surfactants sector.

Another producer confirmed that it was experiencing no difficulty in persuading customers to accept its fee increases for 2013, explaining that buyers are nervous owing to the heavy turnaround schedule next year.

The producer had targeted plus €20-30/tonne for its adder in northwest Europe and plus €30-40/tonne in southern Europe.

A buyer said it had managed to avoid any increases in its conversion fees by diversifying its sources of supply, but acknowledged that most European sellers are set on higher fees for next year.

The buyer said it was not expecting a strong market in the first half of 2013.

Market activity is declining as participants prepare for the Christmas holiday. EO demand for use in surfactants and agrochemicals remains high, but offtake for applications linked to the automotive and construction industries remains low on account of continuing macroeconomic weakness.

Many buyers have followed a hand-to-mouth purchasing strategy this year, hoping to mitigate the impact of the large ethylene-driven price swings that have characterised the EO market in recent months.

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

($1 = €0.76)

By: Samuel Weatherlake
+44 20 8652 3214

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