Europe's ethylene spot market is tightening with less material available than in previous weeks.
OLEFINS
Production disruptions in Germany and France are exacerbating the tightening as many players begin to speculate about a shift in the contract price which will settle at the end of the month. Propylene remains bullish on rising downstream demand.
AROMATICS
Participants will be eyeing developments in the styrene spot market as discussions for the February styrene contract price begin. The recent weakening in the dollar against the euro is expected to dampen the likely price rise.
In the polystyrene market, buy and sell ideas for the contract price are expected to converge as discussions are finalized. Buyers were previously heard expecting a Eur5-10 rise in January monthly contracts, while sellers held offers at a monthly rise of Eur15/mt.
For benzene, the European market is expected to remain the lowest priced region globally as product length has steadily increased through January on robust cracker run rates in recent weeks and limited export opportunities.
Toluene and mixed xylenes are expected to continue to price off gasoline blending economics as demand from chemical end users is slow on poor benzene conversion economics.
POLYMERS
Polyethylene supplies are plentiful on the spot market but prices are being steadied by the rising cost of crude oil and a surge in Asian prices.
The significant tailwind to European sentiment from the Asian price strength is expected to continue in the coming week, although holidays at the end of the month may see some Middle Eastern export flows change direction back to Europe.
Polypropylene fundamentals remain bullish as demand picks up following the December lull. European PET prices continue to tick higher.
Players will be eyeing raw material cost increases fueled by oil climbing close to $70/b as well as rising Chinese demand for virgin PET on a recently implemented ban on imports of 24 grades of solid plastic waste.
ETHERS AND METHANOL
Some potential for increased activity has been seen for MTBE at the end of this week.
There has been talk of better export opportunities for ARA-based blenders as gasoline demand has spiked in the US Gulf Coast region.
This is heard to be because of weak cracker margins, refinery outages due to the weather and a huge export program from the US, leaving the market with shorts to fill. This has resulted in less oversupply for the ARA market and a chance of more spot business.
European methanol markets are likely to diverge from the Asian price moves with ongoing tightness. Asian prices have been declining even though they continue to trade at a premium to Europe.
INTERMEDIATES
European AA/VAM markets are likely to face upward pressure in the coming week on higher methanol prices and the closure of the VAM arbitrage from Asian adding to the shortfall of material.
MEG supplies are tight in Europe with demand for both anti-freeze and PET gaining further momentum in a cold snap across most of the continent.
Sentiment is bullish on recent price jumps and the continuing strength of crude and ethylene prices.
OTHERS
European SBR markets remains stable. Market participant will be watching feedstock butadiene spot price closely along with Asian production which was heard slowing following active pre-buying reported ahead of the Chinese Lunar New Year.
Europe's main caustic soda players filled their tanks at max capacity in December and continue to increase run rates.
They are now waiting for new market directions, mainly from Germany, as well as new direction from a market now tightening with the EU-wide mercury ban.
