As the decline persists in both crude as well as naphtha prices, European contract cracker margins are threatening to breach levels of €1,000/ton ($1,351/ton), as per ICIS. Naphtha was currently being assessed at $495-505/ton CIF (cost insurance freight) NWE and spot ethylene prices are falling fast on poor demand and bearish sentiment globally to mid €600s/ton. This has triggered ethylene buyers to call for a renegotiation of Q4 contract price. Grave concerns are being raised about growingly weak demand accompanied by consistently deteriorating feedstocks amid s fears of a global recession. With naphtha tanking by 34%, and expected to remain weak for the remaining months of the year, buyers are more convinced that the settlement is hugely incorrect.
But, will crude continue falling? It seems unlikely in the light of the emergency meeting called by OPEC when it is expected to announce production cuts and increasing demand for energy in the winter months. Will the uncertainties in the global economic situation surpass the supply concerns and will damp demand have a larger impact on the industry?
20-Oct-08 
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