02 September 2013 17:55 [Source: ICIS news]
LONDON (ICIS)--The European propylene contract settlement for September has been fully confirmed at €1,150/tonne ($1,513/tonne), up by €60/tonne from August, following further buyer support late on Monday.
The initial propylene settlement, which is on an FD (free delivered) NWE (northwest Europe) basis, was agreed between one integrated consumer and two sellers.
The second settlement came slightly later and was between one non-integrated consumer and a third seller.
The settling sellers considered the settlement “a compromise”, adding that cracker margins were already thin and the spike in upstream costs over the last week needed to be taken into account to some extent.
One of the settling producers said that a three-digit price hike was necessary on the back of the heightened feed pressure over the last week, but some middle ground was reached for the sake of the industry so that a number is out there.
One of the settling buyers said that “we feel it is important that there is a settlement, and took responsibility. We were aiming lower for a long time but needed to compromise.”
The propylene settlement news has come later than expected as it is already the 2nd of the month and monthly olefin contracts normally settle at the latest by the end of the preceding month.
One buyer, who was not involved in the settlement process, considered the level of increase larger than expected, but still “acceptable”.
One non-integrated consumer, however, expressed its dissatisfaction with the increase of €60/tonne, which it considered to be too high. It said it had been prepared to pay an average feedstock increase plus slightly more in view of the recent upstream feedstock volatility, but it was not prepared to pay in excess of €55/tonne – stating that feedstock costs had cooled slightly since the higher levels seen last week.
It said it considered that taking a point-on-point feedstock comparison (feedstock costs at the time of settling) rather than an average feedstock cost change over the last month to be an “opportunistic” viewpoint. It added that it was not happy that it had taken so long for a settlement to be reached and that the monthly discipline had not been followed. It further stated that if the settlement had occurred earlier – in the second half of August, and therefore pre-upstream spike – it would have avoided the additional feedstock complication.
($1 = €0.76)
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