Recent rally in naphtha prompts European olefin-polyolefin producers to shift focus to margin retention

08-Feb-13
A recent rally in the naphtha market has prompted European olefin-polyolefin producers to shift their focus to margin retention, setting a mood of caution across the sector, as per sources in Platts. The naphtha market is very tight in the Mediterranean and Northwest Europe at the moment on the back of soaring gasoline prices and an open arbitrage window to Asia, where refinery maintenance is taking place into the spring. A source at one polyolefin producer has forgone an increase in rates in a bid to maintain margins, and is currently running at 83-84%. Naphtha was assessed by Platts at US$992/mt CIF NWE Wednesday, the highest since mid-September. In euro terms it was assessed at Eur 733/mt CIF Northwest Europe on Wednesday, the highest since mid-November. The ethylene contract price for February settled at a rollover at Eur 1275/mt FD NWE, its third consecutive sideways movement reflecting a directionless market. European low density polyethylene converters rejected hikes proposed by LDPE producers in their February contract market, citing bearish near-term expectations of end-user demand. European PE producers said they continued to target small increase for Feb CPs of up to Eur 50/mt. However, producers acknowledge that another round of increase after January will not be easy. A couple of converters said they were unable to meet downstream tonnage targets for January, directing them to seek a rollover for February. Contract price for LDPE was assessed unchanged Wednesday on January's end at Eur 1510-1515/mt FD NWE.
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