Focus article by Nigel Davis :
LONDON (ICIS)--The continued weakness of the euro has pushed feedstock costs higher but it seen as positive for Europe’s chemical producers, industry sources said on Friday. The currency dropped in value further relative to the US dollar following the decision by the European Central Bank (ECB) to begin a €1,100bn round of quantitative easing. It was at an 11 year low against the dollar on Friday. "The euro is good news for me. The exchange rate is basically not helping the European market to drop prices," said a supplier of monoethylene glycol (MEG). The euros fall, however was seen as an added aggravation in January MEG contract negotiations. "The dollar strength/euro weakness is more positive for European business rather than negative,” said an ABS (acrylonitrile butadiene styrene) producer. A weaker currency improved competitiveness for producers and consumers, it added, and would lead to lower import volumes. Customers are relying less on long lead-time imports because of uncertainties over landed prices and seeking additional volumes from domestic European producers. More customers are buying hand to mouth and turning to domestic suppliers to do so. A weaker euro is expected to hit imports into some markets leaving the battle ground to EU producers. Methylmethacrylate (MMA) imports from Asia and Latin America were expected to be hit by the weaker currency. “All signs are that the weak euro will drive imported US dollar material to US dollar-based economies or at least away from euro-based ones as everyone seems to think the euro will fall further in value, possibly to parity with the dollar by end of February,” said a bisphenol A (BPA) buyer. However, European ethylene and propylene contract price (CP) discussions for February are being impeded by the continued weakness of the euro and the ongoing uncertainties surrounding future crude oil developments, market sources told ICIS on Friday. Contract players are trying to make sense of the constantly shifting contract price parameters and contract negotiations are expected to be prolonged. A weak euro will hit the cost of naphtha, Europe’s main cracker feedstock, which is priced in dollars, making it more expensive than before. “The FX rate is still moving down and naphtha is getting more expensive,” a contract settler said. “We have decided not to re-do analysis now but take a fresh look after the weekend,” it added. Asked why it believes methanol spot prices increased this week, a trader said: “To be honest, [I have] no big clue beside the euro.” European spot prices increased from €270.50/tonne FOB (free on board) Rotterdam on Monday to €276/tonne later in the week, up €5.50/tonne. In dollar terms, however, this represented a rise of only $1/tonne.
Additional reporting by Caroline Murray, Helena Strathearn, Matt Tudball, Nel Weddle and Ross Yeo.Back