Europe April Ethylene Contract Settles Up 39% at €1,595/mt on Conflict Disruption

The European ethylene monthly contract price for April delivery jumped 39% month on month to settle at €1,595 ($1,837)/metric ton Tuesday amid supply disruptions, according to producers and Chemical Market Analytics (CMA) by OPIS, a Dow Jones company.

The sharp rise in monomer prices was higher than expected , as supply chain disruption caused by the Middle East conflict has impacted energy infrastructure and supply chains. By comparison, the European ethylene monthly contract price for March delivery settled at €1,145/mt, up 4.6% from February.

Upstream energy costs have soared through the month of March, following the Feb. 28 start of the bombing of Iranian targets by U.S. and Israeli forces. Dated Brent oil futures prices hit $119/barrel on March 31, according to data from the Intercontinental Exchange (ICE). Olefin feedstock liquefied petroleum gas (LPG) prices also surged, as installations in Saudi and Qatar have been hit by Iranian drones and ballistic missiles since the start of March.

CIF Northwest Europe naphtha feedstock prices gained an average of €266/mt in March to $825/mt, compared to the February average, according to OPIS data March 30. That’s in comparison to an increase of just €37/mt in the average of February compared to that for January, OPIS data showed. European olefins producers take a large portion of their feedstock from naphtha, and its monthly average is typically factored into their contract price negotiations.

Europe dependent on US imports as oil hits fresh highs

As Europe is becoming increasingly dependent on U.S. imports in recent months, the arbitrage for now remains open.

European inland delivered prices for March delivery were heard trading at premia of 82% to the March contract price of €1,145/mt, equating to around €2,083/mt Free Delivered Northwest Europe last week, for small volumes. Standardized minimum 1,000 mt volumes were heard indicated at premia of 38%-50% above the March contract price, or around €1,649/mt.

In the U.S. spot market, ethylene export spot volumes traded at 33 cents/lb Mont Belvieu or around $727/mt on March 30, while U.S. spot propylene deals were heard trading at 60 cents/lb or around $1,322/mt FOB U.S. Gulf Coast. Subject to freight costs, the arbitrage on paper looked open.

However, European sources pointed to the difficulty in securing vessels at the right price. With the Middle East conflict also impinging on freight rates, one trader cautioned that going forward it could be problematic finding available ships to charter.

Nevertheless, spot freight ethylene pricing for 11,500 mt parcels was heard indicated at around $240-250/mt, while the smaller 6,500 mt ethylene parcel size freight was indicated at around $285-$295/mt. This would make a delivered Northwest European cargo at around $972/mt for 11,500 mt cargoes, at cost excluding U.S. terminal fees and margin, and the smaller 6,500 Northwest European delivered cargoes would land at a cost price of $1,017/mt.

“If you can land it you need to find laycan ships and a lot of it is going to go to Asia and so exports may prove difficult to secure,” a second trader told OPIS March 24.

A total of 301,173 mt of ethylene has been shipped into Europe from the U.S. as the arbitrage opened, according to the latest Vortexa data, amid a series of unplanned production issues and as the second quarter planned turnaround season is set to start.

In April a total of 22,875 mt of ethylene is already chartered to load and depart for Europe from U.S. ports. This compares to a total of 100,843 mt for January, 93,137 mt in February, and 84,318 mt in March.

In comparison, a total of 39,339 mt of propylene exports have set set sail to Europe, with imports rising from an initial 6,761 mt in January to 16,566 mt in February and dipping slightly to 16,012 mt in March, according to the same Vortexa data. The price of propylene freight is similar but price dependent and in this context likely to price at a premium over ethylene.

The April propylene contract remains unsettled in Europe. The European propylene monthly contract price for March delivery settled at €1,000/mt, with buyers unable to agree to the substantial increase put on the table by sellers. The March contract amounted to a 3.6% increase from the February delivery monthly contract price, OPIS data showed.

Reporting by Miguel Cambeiro, mcambeiro@opisnet.com; Editing by Rob Sheridan, rsheridan@opisnet.com