Spot steam cracker margins will probably be cut by lower November contract prices for ethylene and propylene, according to naphtha and LPG sources Friday, as prices of the feedstocks of choice stabilized in Europe.
The Northwest European November ethylene and propylene contract prices both fully settled, Eur90/mt lower on the month at Eur1,060/mt ($1,334/mt) FD and Eur1,015/mt ($1,278/mt) FD, respectively, industry sources said on Thursday.
The fall was larger than expected, and sources said the new prices would hit margins.
"We expected a smaller drop of $50 or $60 not $90," a petrochemical end-user said.
"It is much more down than the feedstock so it is absolutely not good...for marginal producers it might be difficult," a naphtha market source said.
CIF NWE open spec naphtha cargoes were assessed $5.50 lower on the day at $691.50/mt, but prices have stabilized somewhat following a $209.25 drop to $666/mt, a five-year low between September 4 and October 16.
CIF ARA propane cargoes fell $15 Thursday to be assessed at $581/mt, after hitting a five-year low of $541/mt on October 24. In the North Sea butane cargo market, the CIF cargo slipped $5 Thursday to $560/mt, after reaching a five-year low of $540/mt on October 16.
However, according to another petrochemical end-user, the impact of lower ethylene and propylene is likely to be negligible. "It's logical that these prices fell because it followed the naphtha down, since the last settlement was made at the end of September and that since then naphtha flat prices fell a lot," the source said. "I think that since there are some outages, the crackers that can run will run with quite good margins," the source added.
Despite spot cracker margins falling by $2.05 Thursday to $460.79/mt, petrochemical producers have seen operating margins at multi-year highs in 2014. Bearish crude markets and increasing competition from US and Baltic origin volumes have pushed both naphtha and LPG to historic lows, meaning feedstock costs have been lower.
Taking current margins into account, petrochemical sources said there was unlikely to be any impact on cracker operating rates as a direct result of the new contract prices.
