The Urethane Blog

European Propylene Weakness

European Dec olefins contract price expectations turn bearish ahead of negotiations

London — Early expectations for December’s European contract prices for ethylene and propylene pointed to a decline, weighed down by falling feedstock costs among other factors, according to S&P Global Platts data and sources this week.

The two olefins serve as the building blocks for the largest set of petrochemicals in Europe.

European olefins contract negotiations for the upcoming month usually begin on the 21st of the previous month and it can take up to 10-11 days for a settlement to be reached.

An olefins monthly contract is deemed fully settled if two separate parties of buyers and sellers reach the settlement at the same price. The Platts ethylene contract price indicator for December stood at Eur1,074/mt FD NWE Thursday, Eur61 lower than the November settlement of Eur1,135/mt FD NWE. The indicator is based on the spot prices of feedstock naphtha and various co-products produced by steam crackers.

Spot ethylene, which plays a crucial role in deciding the contract settlements, dropped Eur109/mt month on month to be last assessed at Eur849/mt FD NWE Thursday.

Demand for ethylene from downstream polyethylene producers is currently weak and supply long, with the product expected to accumulate further length as shipments of downstream products remain difficult because of low Rhine water levels.

“I will not be surprised if ethylene settles at Eur1,035/mt FD for December,” a market source said. Another saw the CP dropping by as much Eur100 for December.

Three cracker restarts scheduled during November are expected to further lengthen ethylene supplies. This includes LyondellBasell’s cracker in Wesseling, Germany, Naphthachimie’s Lavera cracker in France and Czech Unipetrol’s cracker in Litvinov.

Meanwhile, in propylene, market players expected a drop of around Eur50 on the month, which means the December contract is expected to settle at Eur1,010/mt. The November contract price was settled at Eur1,060/mt.

The Platts propylene contract price indicator for December was assessed at Eur990.50/mt FD NWE Thursday, Eur69.50 below the November contract price.