Optimism among European olefins buyers for increased decrease in ethylene prices

29-Jan-14

European olefin buyers are more optimistic about a decrease in ethylene contract prices than propylene for February, amid tightness in propylene, as per Platts. Buyers are aiming for a fall in both contract prices in line with feedstock naphtha. On December 20, when January ethylene and propylene contract prices were settled, naphtha was priced at US$962.25/mt CIF NWE, and is assessed at US$917/mt CIF NWE at the start of this week. Part of the reason for the tightness in propylene can be attributed to reduced operating rates which, although higher from December, are pegged at between 80-85%. But despite the fall in naphtha, cracker operating rates haven't increased, partly due to the length in the ethylene market. Spot propylene is currently trading at par with the January contract price of Eur 1130/mt (US$1545/mt) FD NWE, while spot ethylene is trading at Eur 950/mt FD NWE, a discount of 23.4% to the January contract price of Eur 1240/mt FD NWE. Spot ethylene has also come under pressure from deep sea imports, which were not as prominent in the propylene market. Both sides said the contract price negotiation would be "tricky." Most sellers are aiming for a rollover on both ethylene and propylene. "While sellers have to deal with bigger 2014 discounts on the contract price, low operating rates, [and] increased spot exposures, most buyers will think crackers have bigger margins than in reality," an ethylene and propylene buyer said. "Most sellers will think buyers have strong markets and [polymer-grade propylene], especially since it's high priced on spot."