September ethylene, propylene CPs settle down €50-55/tonne

Nel Weddle

29-Aug-2014

Focus article by Nel Weddle.

Europe eurosLONDON (ICIS)–European ethylene and propylene contract prices (CP) for September have settled down by €55/tonne and €50/tonne respectively, largely on the back of softer upstream naphtha values, market sources said on Friday.

After a couple of false starts, the ethylene CP was finally fully confirmed at €1,150/tonne, down around 5% from August, with both of the sellers involved indicating unified and broad support for the settlement across a wide range of derivatives.

Early on Thursday, an initial ethylene CP was reported between a producer and an integrated buyer not normally known for its participation in the contract process, at €1,160/tonne down by €45/tonne. This was later withdrawn following a lack of support from the wider market – the vast majority of buyers were intent on sticking to their €50-60/tonne or more targeted decreases.

Later on, another initial CP was reported – this time at €1,155/tonne, down by €50/tonne – but as a result of a misunderstanding was not fully confirmed and was declared null and void. A second settlement to follow the €1,155/tonne, was withdrawn.

Such events are extremely rare, and some players would argue that such events prove that the monthly contract price mechanism is working well.

Meanwhile, the propylene CP was finalised at €1,105/tonne, a difference of about 4% when compared to the August contract.

A reduction on prior-month contract prices was widely expected, as naphtha was consistently softer throughout August when compared with the previous month.

Feedstock movements normally play a large part in the discussions, but the supply and demand outlook is also understood to have had an influence.

Contract players had to weigh the impact of the weaker feedstock against the potential effect of scheduled cracker maintenances and uncertainties over derivative demand.

Opinions regarding demand were mixed, with some sources expecting an uptick following a dip in demand due to expectations of lower contract prices, while others expected it to be flat.

Sources said that scheduled cracker maintenances had the potential to tighten both ethylene and propylene supply, but several players noted that the crackers undergoing maintenance were considered to be “smaller- scale”, and/or in rather more isolated areas, which had limited impact on the markets as a whole.

Spot activity on both markets was virtually non-existent, sources said, because of the focus on the CP outcome.

The contracts are settled on a free delivered (FD) northwest Europe (NWE) basis.

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