LONDON (ICIS)--The European July ethylene contract reference price settlement at €1,135/tonne was generally in line with most expectations albeit perhaps at the top end, several sources said on Friday.
The contract settled at a decrease of €15/tonne from June, primarily on the back of the month on month decrease in naphtha feedstock costs.
According to ICIS data, this was around €18/tonne lower in June at the time of the settlement than in May, but sources’ own data varied.
Meanwhile, the supply and demand balance, although improved in June through better demand and exports, was generally expected to remain in a balanced-to-long position next month, not least with two crackers due to be back in operation in early July following planned maintenance.
The market’s focus quickly seemed to centre on expectations for a reduction in the contract reference price of €15-25/tonne, although there were higher and lower targets.
Following the settlement, some selling sources were pleasantly surprised at the outcome, and other sources also said they had anticipated more of a drop – of at least €20/tonne.
“It’s acceptable and within our ballpark range anyway,” a source said, adding: “Minus €15/tonne was our initial position.”
Some contract participants thought the settlement had also come out a bit too early since they had only just begun their own negotiations that day or the day before.
“Too early, too high, I am not that happy with it,” another source said.
Overall though, few ethylene market players were really that surprised by the outcome.
Focus article by Nel Weddle
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Image at top: Steam cracker II, the largest individual plant at BASF's Ludwigshafen site