European producers mull higher September monomer contracts

22-Aug-12

European producers were heard talking of “significant” price increases on September propylene and ethylene contracts this past week, as per ChemOrbis. Talk of further price increases was prompted by strong energy markets last week. Nymex crude reached over the US$95/bbl level last Thursday for the first time in three months and then rose again Friday to a level of US$96/bbl. Naphtha has also risen over the month of August in response to the firmer crude oil prices. Naphtha prices at the end of July, when August monomer contracts were settled, were near the US$850/ton level based on CIF NWE. Current prices, however, are hovering around the US$950/ton level. Contract prices for the month of August jumped €140/ton for ethylene and by €120-130/ton for propylene, significant increases on a monthly basis. Nevertheless, spot prices for both monomers continued to move higher over the month of August due to higher costs, plus relatively good demand stemming from the downstream market, as per ChemOrbis. Spot propylene prices are up by around €100/ton when compared to the market level in the H2-July, prior to August contract settlements. Spot ethylene is up by around €70/ton over the same time period. With the current market landscape, players reported hearing that producers will seek good-sized increases for the September monomer contracts. Producers may also point to cracker maintenance as another supporting factor as several regional crackers will be shut during August and September. Maintenance was planned over this period at LyondellBasell, Borealis, ExxonMobil/Shell, Naphthachimie and Russia’s KarpetNafteKhim, Russian Gazprom’s cracker is down from July to end August while Repsol’s cracker in Spain was down in June and a restart date is not clear yet.