Price and market trends: Spot versus contract gap in Europe ethylene difficult to justify

04 April 2014 09:33 Source:ICIS Chemical Business

The significant gap between spot and contract price (CP) values on the European ethylene market, is difficult to justify, a European producer said on 
30 March.

However, while speaking on the sidelines of the American Fuel & Petrochemical Manufacturers’ (AFPM) International Petrochemical Conference (IPC), the producer said that while the significant disconnect should be discussed, the spot market was such a small proportion of the European ethylene market and therefore it was less important in general terms.

Spot prices reflected the marginal tonne, it said, adding that “spot cannot run a cracker.”

Contrary to some opinion that the disconnect could jeopardise the ethylene contract price as well as the contract process, the producer said that the olefins contract price settlements processes as a whole were fair as they were less reliant on spot price speculation like for example benzene.

The olefins contracts were “made in a proper way,” it said, adding that perhaps the benzene contract process should be 
re-examined.

The April ethylene contract price settled last week at €1,165/tonne FD (free delivered) NWE (northwest Europe), down by €15/tonne from March. Meanwhile, recent spot purchases on the pipeline were done at below €900/tonne FD.

By Nel Weddle