Europe CMCI shows ethylene chain margin management challenges

LONDON (ICIS)–The European ethylene chain is uncertain over the evolution of profitability, despite believing that order book volumes and business conditions will improve in the next 12 months, analysis of the Europe ICIS Chemical Market Confidence Index (CMCI) showed on Friday.

Analysis of the underlying CMCI data for the chain shows that the zero reading on expectations of profitability over the next 12 months is uncertainty rather than an expectation of stability, with the market divided depending on persona type. Producers believe that margins will increase, traders that margins will decrease, with buyers neutral.

Ethylene chain players are highly positive that order book volumes and business conditions will improve over the next 12 months.

The uncertainty over profitability is likely an indication of the difficulty players in this chain are having managing volatility of crude oil prices, exchange rate values and uncertain macroeconomic conditions, and may indicate that players expect volatility to continue in the mid-term.

Although ethylene players believe order books will increase in the next 12 months, they also believe that profitability will fall, and are uncertain on the evolution of business conditions in the next 12 months.

The newly established ICIS Europe CMCI aggregates sentiment from hundreds of petrochemical market players actively involved in price negotiations across more than 60 different markets.

The Europe CMCI runs from +100, to -100, with zero on each index representing neutral, or uncertain conditions, a negative score indicating bearish expectations and a positive score representing bullish expectations. The indexes also gather sentiment on the comparison between the current situation and the situation across the past 12 months to give a complete picture of current market conditions and confidence. The information is gathered in the third week of each month.  A full methodology is available on request.

For more details on the overall Europe CMCI data, click here