Naphtha rally sets cautious tone in NWE olefin-polyolefin market
London (Platts)--7Feb2013/708 am EST/1208 GMT
A recent rally in the naphtha market has prompted European
olefin-polyolefin producers to shift their focus to margin retention, setting
a mood of caution across the sector, sources said this week.
A source at one polyolefin producer said it had forgone an increase in
rates in a bid to maintain margins.
"We are currently running at 83-84%," he said.
Naphtha was assessed by Platts at $992/mt CIF NWE Wednesday, the highest
since mid-September. In euro terms it was assessed at Eur733/mt CIF Northwest
Europe Wednesday, the highest since mid-November.
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The naphtha market is very tight in the Mediterranean and Northwest
Europe at the moment on the back of soaring gasoline prices and an open
arbitrage window to Asia, where refinery maintenance is taking place into the
spring, said traders.
"There is not only demand for gasoline blenders in Europe, but also in
the US which were long in naphtha and are now balanced," added one market
DOWNSTREAM MARKETS LACK DIRECTION
The ethylene contract price for February settled at a rollover at
Eur1,275/mt FD NWE, its third consecutive sideways movement reflecting a
directionless market, sources said.
European low density polyethylene converters rejected hikes proposed by
LDPE producers in their February contract market, citing bearish near-term
expectations of end-user demand.
European PE producers said they continued to target small increase for
Feb CPs of up to Eur50/mt.
"Orders are ticking in. We, however, realize that another round of
increase after January won't be that easy," a producer said, adding that he
was targeting an increase of Eur10-20/mt to Eur1,550-1,550/mt FD NWE.
A couple of converters said they were unable to meet downstream tonnage
targets for January, directing them to seek a rollover for February.
"We are working on a weekly basis with inventory, keeping stock levels
low," one converter said.
Contract price for LDPE was assessed unchanged Wednesday on January's
end at Eur1,510-1,515/mt FD NWE.
PE, a polyolefin, is derivative of ethylene. Ethylene, an olefin, is
produced from naphtha.
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