June Europe olefins contracts settled lower

The June monthly contract prices (MCPs) for European ethylene and propylene were agreed today at €1,220/t and €1,105/t, respectively. Both MCPs fell by €30/t from the previous month, in line with the monthly change in naphtha prices, the feedstock for the majority of European cracker production.

The decrease in average naphtha prices between May and April was €31/t, according to Argus assessments of naphtha para 65 cif NWE, with another commonly used index heard to be showing a similar decrease of just less than €30/t.

The propylene MCP was agreed first, arriving promptly on the last working day of May after apparently straightforward negotiations between individual buyers and sellers. Producers had hoped to hold on to some of the fall in naphtha costs, but with spot prices easing in May and a more cautious demand outlook, buyers wanted at least the feedstock change passed through.

The ethylene settlement followed soon after propylene. Ethylene supply is slightly on the longer side with producers balancing relatively firmer demand for some co-products with managing the ethylene balance. Spot prices have been steady at discounts close to 40pc of the MCP and producers are choosing to ease back production rather than sell at lower prices. Similarly, they were unwilling to go beyond the feedstock movement for the June MCP because of weak margins and the risk of oil prices reversing some of their significant falls in May.

The European MCPs for ethylene and propylene are reference prices used by the industry as benchmarks for long-term contract pricing. Net prices paid vary based on individually negotiated pricing structures, including discounts to the MCPs.