November ethylene, propane contracts under pressure from feedstocks, downstream

The November contract settlements of ethylene and propylene, the primary building blocks for the largest set of petrochemicals, have come under pressure as various factors that go into deciding them have turned bearish, trade sources said. 

      Among market sources, expectations range from a rollover to a sharp decrease by as much as Eur50 for ethylene, while for propylene, it ranges from a rollover to a smaller decrease of Eur10-20. The contracts are expected to settle before October draws to an end. S&P Global Platts ethylene contract price indicator for November stood at Eur1,131.50/mt FD NWE Friday, Eur13.50 lower than the October contract settlement of Eur1,145/mt FD NWE. The propylene contract price indicator for November stood at Eur1,055/mt FD NWE Friday, Eur15 lower than the product's October settlement level. The two indicators are based on a regression model that uses historical prices of products like naphtha as inputs. 

     "Factors for this [drop in olefins contracts] include feedstocks fluctuation, [and] market conditions," a trader said. Other trade sources pointed out several other factors behind the expectation for a decline in contract prices, including under pressure downstream polymers, bearish spot markets for ethylene and propylene and low indications from international markets. 
   
     Naphtha, which serves as a feedstock for two-thirds of the ethylene and propylene produced in Europe, has dropped $97.50/mt since the start of the month and was assessed at $617.50/mt CIF NWE Thursday. Over the same period, spot ethylene prices in Europe have dropped more than Eur100/mt and were last assessed at Eur850/mt FD NWE, while spot polymer grade propylene prices have dropped Eur34/mt and were assessed at Eur1,057.50/mt FD NWE. 

    Spot ethylene in Asia has seen the sharpest drop, down Eur230/mt over the period to its most recent assessment of Eur990/mt FD NWE. 

    In the downstream market, low density polyethylene prices have dropped Eur60/mt since the start of the month to the most recent assessment of Eur1,050/mt FD NWE Thursday. The price of polypropylene homopolymer has dropped Eur20/mt over the same period to its most recent assessment of 1,240/mt FD NWE.