September contract prices for European ethylene likely to roll over from August or see modest correction while propylene headed toward reduction of about €50/tonne as upstream price swings, economic uncertainty slow demand

LOS ANGELES , August 25, 2011 () – September contract prices for European ethylene and propylene will likely settle late because of upstream price swings, economic uncertainty and a hesitant mood among buyers, ICIS news reported Aug. 24, citing market insiders.

Recent political developments in Libya have contributed to uncertainty and buyers are holding out to see where crude prices go, sources told ICIS. Furthermore, turbulence in financial markets has caused downward pressure on crude and naphtha prices until recently when those prices regained some ground—adding to further uncertainty. Worries about a double-dip recession have also obscured forecasting for September.

These factors have added up to a tentative mood in the market, with only a modest month-over-month uptick in activity expected for September.

The market is more stable for ethylene due to a moderate upswing in non-polymer demand, especially in the latter part of August. Consequently, early signs for September ethylene suggest either a rollover from August or a modest correction of €10-€20 per tonne (US$14-$29/tonne) as balanced fundamentals are considered against a drop in feedstock prices.

Producers are saying, however, that if crude and naphtha prices rebound a little higher, they will seek a rollover, especially since there are upcoming scheduled shutdowns that will tighten supply.

Meanwhile, market fundamentals for European propylene point more definitely to a price reduction. There have been a slew of downstream plant shutdowns that has put a dent in demand. While buyers are seeking reductions of €50-€60/tonne, at least one supplier expressed an anticipated reduction of less than €50/tonne due to upstream costs.

Making matters worse for suppliers, spot prices for propylene are settling at least €200/tonne below contract prices for August, making a price reduction for September almost a certainty. The August settlement was above where it should have been, according to one buyer, and didn’t actually reflect market fundamentals, making propylene due for a correction in September.

The August contract price for European ethylene settled at €1,120/tonne free delivered northwest Europe, a €30/tonne month-over-month increase, ICIS reported. The August contract price for propylene settled at €1,115/tonne FD NWE, a €15/tonne decline from the previous month.

The primary source of the article is ICIS news, Surrey, England, Aug. 24, 2011.

* All content is copyrighted by Industry Intelligence, or the original respective author or source. You may not recirculate, redistrubte or publish the analysis and presentation included in the service without Industry Intelligence's prior written consent. Please review our terms of use.