Europe March ethylene, propylene in line with expectations

Focus article by Nel Weddle

LONDON (ICIS)–The European ethylene and propylene contract price settlements for March were “totally in line” with the vast majority of market expectations, sources said on Friday.

Ethylene settled at €1,180/tonne FD (free delivered) NWE (northwest Europe), down by €20/tonne from February, while propylene rolled over at €1,130/tonne FD NWE.

For many, the surprise was in the speed of the agreements as contract discussions over the past year had become quite protracted settling often on the last day of each month and in one case – in September 2013 – settling once the month had already started.

“In this case, from the start, the spread [between producers and consumers] was not wide,” a producer said.

“There wasn’t a wide range, and no surprises,” said another producer.

“We should be working on the timing discipline [anyhow],” a third producer added, saying “a wait and see approach doesn’t change anything” – meaning inferences regarding feedstock and supply and demand fundamentals can be wrong at any time.

Ethylene decreased because while feedstock naphtha was deemed largely stable to slightly softer, lengthy supply, and a heavily discounted spot price versus contract, weighed on the outcome.

For propylene, constraints coming from cracker rate reductions, the attraction of light feedstock cracking from a margin perspective and a generally better derivative performance than for ethylene, led to a rollover.

However, not all sources were in agreement with the outcomes.

One producer said it was disappointed by the €20/tonne decrease for ethylene and that sentiment was more bearish than in actuality. It said demand was reasonable and looked to be the same into March.

The producer added that exports had not been distressed and rather had helped to rebalance the market.

One consumer said it had targeted a decrease of about €20/tonne for propylene having looked at the slightly softer naphtha, and the general view that a much better balanced market would prevail in March with the expected resumption of operations at Borealis’ propane dehydrogenation (PDH) unit following maintenance during the first half of the month.

Both contract prices settled on Tuesday, 25 February. Three producers and six consumers directly confirmed the ethylene contract price, while two producers and two consumers confirmed the propylene.

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