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Are European ethylene contracts heading for 3rd straight month of hikes?

by Başak Ceylan -
  • 17/04/2019 (04:51)
April is only halfway through. However, players in Europe already started discussing the next ethylene contract as April is a shorter month due to Easter and bank holidays. Early expectations are that prices are likely to settle higher, with anticipated increase amounts ranging between €30/ton and €50/ton.

Price gains ahead again in May

Most players are expecting ethylene contract prices to settle with €30-40/ton increases while others see prices settling even higher with increases of up to €50/ton.

March settlement snapped four months of declines and increased by €30/ton ($34/ton) from the February settlement. April contracts also settled with a €30/ton ($34/ton) increase, marking the second consecutive month the ethylene contracts increased in Europe.

Higher naphtha, oil shape contract expectations for May

Higher energy costs are seen as the main support for firmer expectations regarding May ethylene contracts. Brent crude, the European benchmark price for oil, broke the $70/bbl threshold for the first time since November 2018 this month. Despite showing some volatility, Brent crude futures have risen by approximately 30% since the start of the year.

Naphtha costs in Europe also increased in tandem with strong crude oil futures. According to ChemOrbis Price Wizard, naphtha costs have risen by more than 20% since January.

Production issues propel spot prices higher

The spot ethylene market in Europe began to tighten at the start of the month due to several unplanned cracker outages across the region.

As data from ChemOrbis Production News shows, Dow Chemical’s cracker in Bohlen, Germany was shut due to some technical problems as of early March and production rates at Total’s Feyzin cracker in France were reduced in late March.

Although the spot ethylene market has been relatively stable at around a seven-month high this week, it followed a firming trend for the past three months and increased by almost 30% since the start of 2019.
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