Bullish expectations remain for the olefin markets, ethylene, propylene and butadiene in April despite a fall in upstream costs this month, as per Platts.
Naphtha, the primary feedstock for olefin production in Northwest Europe, has fallen 7% in March to be assessed at US$451.25/mt CIF NWE on Thursday. Meanwhile, ethylene, propylene and butadiene spot prices continued to show strength amid strong fundamentals that are expected to remain throughout next month. Cracker operators, aiming to capitalize on spot cracker margins that are at their highest in a decade, are running close to full rates.
Ethylene, which has maintained strength in March with spot prices assessed at Eur1,115/mt FD NWE on Thursday, Eur5/mt above where they began the month, is expected to show a flat to higher contract price next month. S&P Global Platts ethylene indicator for April had reflected the strength of ethylene's spot price, outweighing the decrease in the price of naphtha, to be assessed at Eur1,056/mt on Wednesday, Eur6/mt above the industry's current settlement. In April, the ethylene market is expected to mirror that of March, with maintenance at both upstream steam crackers and derivative polypropylene plants planned heavily for next month. 5 out of the 43 stream crackers in Europe and Turkey will start maintenance in March and early April, each lasting around 45 days.
Propylene expectations proved similar off the back of currently tight supply amid strong derivative demand as spot prices rose 17% so far in March to be assessed at Eur1,079.5/mt FD NWE on Thursday. Platts propylene indicator for April was assessed at Eur899/mt Thursday, Eur34/mt above the Industry's March CP settlement.
Similarly, bullish sentiment has characterized the butadiene market, with a number of production issues. Butadiene prices were assessed at Eur1,900/mt Thursday and although lower than the five-and-a-half-year high of Eur2,350/mt seen earlier this month, it was still significantly higher than the Eur698/mt seen a year ago.
Michael Mccafferty, petrochemicals analyst at Platts, said: "The cost of ethylene production is low in Europe and Asia right now because of high cracker co-product credits on heavy feedstock ethylene production. The butadiene market is tight globally and it is reducing the cost of production for ethylene," he said. "At the same time the Northeast Asian market is generally tight on ethylene and the European market is running production hard. In Europe and Asia ethylene production margins are very high."
Spot olefin prices encouraged higher by derivative demand have meant cracker operators have been running hard. Olefin sellers said this week that crackers in Northwest Europe have been running at run rates above 90% of nameplate capacity. While falling naphtha and a now softening Asian market were cited as bearish factors that may minimize ethylene and propylene increases into April, they were not considered strong enough to overpower European fundamentals. Demand for ethylene and propylene was expected to remain resilient in Europe as shortages in polymer markets, on uncompetitive import offers encouraged by a weak euro against the dollar, had allowed European polymer producers to significantly increase their margins this month.
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