The European March monthly contract price (MCP) for ethylene settled this morning at €1,220/t, a €30/t increase from February. Negotiations were difficult and went into the start of March as merchant buyers and integrated producers held firm on different views of the market.
When negotiations started last week the average naphtha feedstock increase was around €27/t. Merchant buyers, mostly integrated into polyvinyl chloride (PVC), continue to struggle to pass through ethylene prices increases. After compromising with an above naphtha settlement for February's MCP they were firm on not accepting anything above feedstocks and wanted to hold the increase to €25/t.
Producers, many of which are integrated into polyethylene (PE) derivatives, have experienced an upturn in downstream demand and pricing and wanted this reflected in the ethylene settlement.
By 1 March the average naphtha increase for February had increased to €29/t and, with higher crude prices in the first days of March, buyers reluctantly accepted the €30/t increase.
Producers will be equally unhappy that the increase will do little to improve cracker margins. These remain close to breakeven for naphtha, on which the majority of European production is based, although higher co-product prices will help and those producers integrated into PE and or having feedstock flexibility will be doing better.
