Ethylene settled at €945/tonne, up by €10/tonne from June, while propylene settled up by €17.50/tonne at €670/tonne.
Many sources said that the settlements were within their expectations given feedstock developments over the month.
According to ICIS data, the average naphtha price for June was €14/tonne higher when compared with the average for May.
“It’s exactly what I expected given the raw materials development and a still healthy market in general,” a source said.
“More or less within expectations,” was a phrase frequently repeated following the settlements mid-week.
“It’s not a big surprise,” an ethylene buying source said, “I guess its a fair settlement.”
The speed of, and what some have described as smooth, discussions reflected a narrow talking range between buyers and sellers from the start.
Ethylene buyers’ starting positions were said to have been at a rollover or plus €5/tonne, while sellers’ positions were heard closer to plus €10-20/tonne.
Propylene players focused on feedstock developments as well as the ongoing tightness in supply, which is generally expected to be tight although gradually rebalancing through most of July as the impacts of the French strikes, and other unplanned hiccups at crackers here and there are worked through.
Some sources said the €10/tonne increase for ethylene had capped the potential upside for propylene but it is clear that propylene players also kept one eye on global developments keen to avoid any repeat of last year’s poor performance for some derivatives outshone by cheaper global competitors.
“We have to be careful not to attract imports,” a second source said, “it [last year’s decline] took an awful long time to reverse it, we dont want to open the doors [to imports] again.”
“We shouldn’t be too greedy,” the second source said.
Some players saw the larger adjustment on propylene as a step towards closing the gap between the ethylene and propylene contract prices.
The propylene/ethylene ratio fell substantially in the second half of last year as European propylene had to be brought in line with weaker US and Asian markets.
Of course, the settlements were at the low end or top end of the expected ranges for some players, depending on whether they were in a buying or selling position.
“Ethylene settled below the average cost change despite healthy demand for July and a tighter spot market,” a selling source said.
“They [both ethylene and propylene] were higher than I was hoping for,” a buyer said, adding that there had been too much focus on the current elevated supply-driven spot prices, rather than on the concerns over polymer demand and a bearish outlook for feedstock in July.
Polymer performance is indeed a growing concern. Volumes are still robust, sources said, but prices are under downward pressure and it was questionable whether polymer producers would be able to pass on the monomer increases.
“Some people are worried on the PE (polyethylene side) especially with regard to imports,” a third source said.
Another player said: “I wouldn’t describe it as bad, it has become a bit more challenging.”
These concerns do not appear to have translated into reductions in ethylene or propylene consumption and so have not been felt at the cracker level. However, there was a view that once restocking following the French strikes and other unplanned issues had been completed, a slow-down would soon be visible.
The contracts are settled on a free delivered (FD) NWE (northwest Europe) basis.
Focus article by Nel Weddle