Broad consensus for Europe April C2 CP, less so for April C3

31 March 2017 14:41 Source:ICIS News

LONDON (ICIS)--While there has been widespread support from European ethylene players for the rollover for the  April contract reference price, propylene players have been less forthcoming in their support for the €15/tonne increase in the April propylene contract reference price, according to sources on Friday.

Propylene started to settle first and quickly found the minimum “2+2” producer, consumer configuration needed to fully establish €880/tonne as the new contract price.  

Ethylene followed soon after with a rollover at €1,050/tonne confirmed by five producers and five consumers representing a wide range of derivative sectors.

“I had expected more of a discussion to find a compromise, but a broad consensus was found relatively quickly and easily,” a source said of the ethylene settlement.

“Regarding the propylene, I was still in discussion with my partners and then woke up and found it had settled,” the source added.

It said “in terms of the price though, there are no complaints from me.”

However, others found it [the propylene settlement] “disappointing” as they had been close to announcing a rollover settlement.

A second source said that the plus €15/tonne settlement had been done “in the pause for further conversations to seek wider market consensus.”

A third source said, “we could have rolled over, but given the situation on spot, it is an acceptable number, [although] I had hoped for a different outcome.”

"I could have seen and supported a rollover... but for a number of players, the market felt tighter than we saw it," a fourth source said.

“The fact that there are only the minimal two settlers on the buy side reflects the widespread buyer frustration with the outcome,” added the second source.

Elsewhere, a couple of sources had anticipated a slightly higher increase for propylene, while one source said there should have been an increase for ethylene given the tight market and some talk that certain derivative production had had to be reduced a little due to lack of feed – this has yet to be verified.

Factors driving the April discussions included the decrease in naphtha in March versus February values – according to ICIS data this amounted to around €30/tonne.

More subjective though were the views regarding supply and demand. Both the ethylene and propylene spot markets have been characterised by tight supply and very high spot prices since the end of February. However, maintenances have been well-prepared for by contractual consumers so spot activity in general has been very limited over the past month.

The contract reference prices are agreed on a free delivered northwest Europe basis and are subject to discounts and/or rebates depending on individual P&C contract terms and conditions.

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By Nel Weddle