Focus article by Nel Weddle
LONDON (ICIS)–European spot ethylene and propylene markets are stable to soft as players await the completion of spring cracker maintenances in the run-up to the start of June contract reference price negotiations, market sources said on Friday.
Ethylene pipeline spot prices had been residing in the low €1,100/tonnes since mid-March when the bulk of the cracker maintenance “crunch” period got under way. Then, spot buyers were faced with limited availabilities with sellers generally reluctant to give away volume.
Sentiment has, however, been changing over the past couple of weeks – the turnaround season is almost complete, derivatives maintenance is under way, feedstock has declined in May compared with April and, downstream, the polyethylene (PE) market has slowed – so several players feel that the market is at an inflection point.
“We are balanced, we can live with our inventories,” a source said.
While the spot market has been thinly traded of late, sources have instead remarked upon the volume being moved on a swaps basis which reflects the ongoing caution over supply but also a recognition that availabilities have been improving. Europe is traditionally net long of ethylene under normal supply and demand conditions.
“We are swapping here and there,” a second source said.
A third source added, “we’ve done quite some volume on a swap basis.”
This week, with no new issues heard from the production side – two remaining cracker restarts are still due by the end of the month – and with bearish sentiment making for a weak market in Asia, most sources canvassed this week thought spot pipeline prices more realistic at €1,050/tonne – contract price flat.
Sales at €1,100/tonne and above were “no longer repeatable” the first source said, while the third said “€1,100/tonne feels too high for May.”
Sources mentioned affordability issues, particularly for certain grades of PE, as an added factor pushing ethylene spot indications down.
There has been limited news from the deep-sea sector but sources have spoken of the wealth of opportunity with volumes said on offer from the Middle East and the Americas. Shipping reports showed two cargoes – ex Rabigh and Ruwais – fixed for Europe/Med destinations so far in May – sellers report limited buying appetite from Europe though.
Propylene spot prices were quick to fall from the peaks that were seen in mid-March but have recently stabilised around contract price flat to a small premium 1-2% (polymer grade) over the past couple of weeks largely through support from recent and ongoing production hiccups.
Polymer grade and chemical grade prices have diverged, though, with an extended derivatives outage putting additional pressure on coastal supplies and leading to deeper discounts, while inland demand has slowed as marginal export opportunities are not as workable as before.
Lower prices are anticipated by several players who note the recent fixing of two US parcels for delivery in June, a time when the vast majority of production should be fully operational.
“The market is lengthening,” a fourth source said, “sellers are unusually asking if we can move their volumes… we will see prices coming off.”
June contract reference price discussions will start next week.
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