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European olefins move to monthly pricing

Economic growth, Oil markets
By Paul Hodges on 18-Dec-2008

The blog warmly welcomes the move by players in the European olefins market to re-engage with monthly pricing. The rationale for its support is based upon the conclusion of the major report that International eChem produced 3 years ago, Pricing for Profit:

“The cumulative impact of the current pricing mechanisms has caused the wider marketplace to become increasingly inefficient at balancing supply with demand, particularly over the short term, with an adverse effect on total industry profitability”.

This conclusion has been confirmed, once again, by the disasters that have taken place this quarter. Quarterly price mechanisms are not efficient, and they cause major value-leakage by encouraging consumers to speculate on likely movements in feedstock prices.