EPCA’17: Europe ethylene players react to October contract settlement

Source: ICIS News

2017/09/30

BASF Ludwigshafen cracker IIBERLIN (ICIS)--While there has been some disappointment – from producers primarily – over the 3% increase in the ethylene contract reference price for October, most responses have been fairly pragmatic.

“I am a bit disappointed, but it’s done, it is what it is,” a source said.

Another said, “[the] settlement is within the expectation range, yet on the low side.”

Other sources said the settlement was fully in line with their expectations, but a couple were more vocal regarding their unhappiness and said that the increase did not reflect current supply and demand fundamentals.

“We are not supporting [the increase], while it covers feedstock cost increase, it doesn’t do just to the fact that the market remains very tight,” a third source said.

The third source also highlighted firmer global markets and the boost to derivative demand in the aftermath of Hurricane Harvey in the US as reasons for more of a price hike.

Ethylene spot prices have been on a firm footing because of supply constraints and robust demand for some time now. Discounts to the prevailing contract price have not been seen since H1 July.

The European ethylene contract reference price for October fully settled on 27 September at €1,025/tonne, up by €30/tonne from September.

Two producers and three non-integrated consumers directly confirmed the agreement.

The increased value of naphtha in September versus August drove the discussions. According to ICIS data, the month-on-month increase in September was around €30/tonne.

There was some concern that the volatility in crude oil values over the past days would disrupt the negotiations but with players in final preparation for this weekend’s 51st European Petrochemical Association (EPCA) meeting, it seems this was no time to complicate matters.

The annual EPCA meeting runs from 30 September to 3 October.

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Pictured: BASF's cracker II at its Ludwigshafen, Germany, verbund site (source: BASF)