30 September 2013 13:09 [Source: ICIS news]
The October ethylene contract fell by €35/tonne ($47/tonne), settling at €1,225/tonne, while the propylene contract dropped by €40/tonne, to €1,110/tonne, both on a FD (free delivered) NWE (northwest Europe) basis.
“We will go down by more or less the monomer,” said one producer, “but no more.”
“I hope we don’t need to go down as much as monomer,” said a second producer.
Several buyers were looking at larger price reductions than the €35-40/tonne of the upstream monomer contracts, however.
“If naphtha keeps hovering around the $900/tonne mark, it will be difficult for them [producers] to limit the price drop to the monomer,” said one large buyer and this sentiment was echoed by others.
It was the surge in naphtha prices early in September that led to strong sentiment in the monomer markets, and hikes of €50-60/tonne in September monomer contracts.
These were transferred onto the polyolefins markets, but by the end of the month as Middle Eastern tensions eased and the pressure on naphtha prices was lifted, PE and PP demand slumped and September was a disappointing month for sellers.
Industry stock levels have risen from low August levels with producers, while buyers have been destocking, as there are no longer any expectations of higher prices in the weeks to come.
On Monday, naphtha was trading at $890-892/tonne CIF (cost, insurance, freight), down from a high of $965-967/tonne CIF NWE during the week ending 6 September.
Spot activity in the polyolefins sector has also seen a slowdown after reaching a high point in early September, but now prices are easing.
Low density polyethylene (LDPE) prices had moved above €1,400/tonne FD NWE but were now trading around €1,340/tonne FD NWE.
Similarly, PP copolymer prices have slipped to below €1,300/tonne FD NWE, from the mid-€1,300s/tonne FD NWE in many cases in early September.
End-year rebates were also coming into play for buyers, who needed to reach committed volumes with their regular producers to be able to achieve discounts on their annual volume. At this point in the year, net prices with mainstream producers can often easily match spot pricing with traders because of this.
Discussions over October pricing will begin in the coming days and the direction of upstream naphtha is expected to have an impact on demand and pricing this month in the polyolefins sector.
($1 = €0.74)
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