Europe Aug ethylene, propylene contracts supported overall by wider market

LONDON (ICIS)–The latest contract price settlements for ethylene and propylene have found predominantly good support from the wider markets, the outcomes having been in line with most expectations, market sources said on Friday.

The ethylene contract price was agreed at €925/tonne, down by €20/tonne, while the propylene contract price rolled over at €670/tonne.

The initial ethylene settlement took many by surprise coming as it did on Monday 25 July, before some contract participants had had the chance to discuss with counterparties following holiday absences. for some, the early timing was the only quibble.

“It’s a good settlement, but too early,” a source said.

Others felt the €20/tonne decrease was a little steeper than necessary, but overall most thought the drop was in line with the decline on naphtha in July versus June.

“The outcome is realistic and reflects feedstock developments,” a second source said.

“Minus €20 is quite a good settlement, though I would have preferred minus €10,” a third source said, adding “directionally it is a correct move for a market which is starting to become more relaxed [from a supply perspective], naphtha is down.”

The rollover for propylene proved a bit more exasperating for a couple of players.

Whilst many said the rollover settlement was a good compromise, with the softer feedstock offsetting the tight supply and demand balance, one propylene player said the outcome was “completely inappropriate.”

It said that the rollover was “not a reflection of market circumstances”, referring to the current lack of spot availability and spot prices indications that have consistently been at a premium to the prevailing contract price.

“There is a lot more demand than supply, and the outlook for this [in August] doesn’t change,” the propylene player said.

Taking the two settlements into account, sources were pragmatic.

“With the new prices, cracker margins are still healthy,” the second source said.

“Everything has to be seen from a broader picture, we can be happy that entire industry is enjoying good margins,” it said, adding “we can’t assume this will last for ever.”

Certainly, the ongoing decline in naphtha prices since the settlements will have gone some way to softening some critics’ views.

“With naphtha today, you are not going to find a producer complaining,” the third source said.

Follow Nel Weddle on Twitter

Focus article by Nel Weddle