Second European ethylene April CP settlement remains elusive

Focus article by Nel Weddle

LONDON (ICIS)–A second European ethylene contract price (CP) settlement for April has so far remained elusive, giving rise to speculation that the initial agreement at plus €35/tonne could be revised, market sources said on Friday.

An initial April CP agreement at €945/tonne was announced Thursday afternoon by a major non-integrated consumer and one of its suppliers, a major olefins producer.

While a second non-integrated consumer also confirmed its acceptance of the €35/tonne increment with the same producer, a second producer’s confirmation is required to establish the “two plus two” configuration needed to fully confirm a new CP.

Sources said the lack of a swift and full settlement spoke volumes about how the €945/tonne was being regarded in the market.

To say producers were disappointed about the magnitude of the initial adjustment is a bit of an understatement.

“It’s a bit of a shock,” a producer said, “[I’m] surprised by the speed and the level of it.”

“It’s way too low,” a second producer said.

“Plus €35/tonne is nothing more than a standard conversion of naphtha, a basic feed movement,” a third producer said, adding that it was “utterly ridiculous”.

Sources said that the initial settlement had not taken into account the tight and tightening supply and demand balance – several unplanned production issues have put further constraints on systems already dealing with scheduled maintenance, while demand is very robust, helped by the weak euro.

“From any perspective its too low now, and was already when it was done,” an integrated player said.

Some sources said they had been anticipating a settlement only early next week while they watch the developments on the upstream markets. Crude oil strengthened on Thursday because of new tensions in the Middle East involving Saudi Arabia and Yemen. Additionally, naphtha is strong in its own right because of good export demand.

The lack of clarity in the ethylene CP situation has stalled propylene CP negotiations, some sources said.

Current CP indications for both ethylene and propylene are obviously higher than the €35/tonne, but fall short of a three-digit rise.

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