Europe spot ethylene softens in north, firms in south

Focus article by Nel Weddle.

LONDON (ICIS)–Spot ethylene prices are moving in opposite directions: softer in the north, stable to firmer in the south, largely reflecting differences in supply fundamentals, market sources said on Friday.

Spot deals have this week been recorded around €1,030/tonne FD (free delivered) on the pipeline in northwest Europe, down from €1,040-1,060/tonne last week and off the eight-month high of €1,065/tonne achieved in June.

Softer prices are being attributed by some sources to an improved supply and demand balance, as well as a decline in upstream naphtha prices. Prices had moved up in June on a combination of better-than-expected demand, firmer naphtha and possibly a knee-jerk reaction to the explosion at Shell’s Moerdijk, Netherlands site early that month.

There are several sources who continue to describe the market as tight. There were others who said that, as tightness in prompt availability was more down to individual planning issues than a market-wide conditions, they viewed the softening prices more as a correction.

“The market [in the north] is not tight, just less long,” a source said.

“Ethylene is not tight, it is just that nobody is desperate [to sell], nobody is exporting, its all under control,” a second source said.

Others agreed with that assessment of the market.

“How can 5,000 tonnes be bought for August at CP [contract price] minus 15% and the market be tight?” another source said.

“I am not aware of any [net] contracts being as low as minus 15%, if spot had got to maybe CP minus 5% then I would think the market was tight,” it added.

Sources also mentioned the fact that the restart delay of Sabic’s Wilton, UK cracker following maintenance, was able to be covered by some spot purchases and that its imminent return would also impact on the market’s overall supply and demand balance.

Meanwhile, supply constraints in the Mediterranean – Versalis’ Porto Marghera, Italy cracker being offline, recent issues at Repsol’s Tarragona, Spain cracker and Petkim’s forthcoming shut down of its Aliaga, Turkey cracker – have kept ethylene on a tighter balance compared with in the north.

A recent sales tender out of the Middle East was bid $60-80/tonne higher than the one a week or two previously, according to trader sources, and CIF (cost insurance freight) basis prices have steadily risen through the $1,300s/tonne, trading at $1,400/tonne last week. Discussions this week have centred on the high $1,400s/tonne and possibly at $1,500/tonne CIF.

The weaker spot ethylene prices and softer naphtha values have inevitably led to speculation over the contract price for August and many already have the view that “directionally it is down” from the €1,220/tonne FD NWE settled for July.

However, discussions will not get under way for another two to three weeks yet.

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