21 October 1996 00:00 [Source: ICB]
European methylene diisocyanate (MDI) producers are hoping for a reversal in fortunes over the next few months, based on stronger demand from the European construction industry and a recovery in the Far East. In Europe, polyol price hikes of 5-10%, announced for Q4, appear to be moving ahead, adding further support for MDI hikes, with flexible polyol prices now reported in the DM2400-2550/tonne ($1574-$1672/tonne) range.
Higher feedstock costs are also driving MDI producers to seek higher prices.Those European players who predicted some price erosion ahead of new European MDI capacity additions are now more bullish since much of the capacity scheduled for start-up in Q3 has been delayed into Q4. This coupled with a pick-up in demand from the construction industry will exert pressure on inventories in Europe for the remaining months of the year, they claim.
Producers are now posting prices of DM3450-3700/tonne for crude MDI in October, compared with prices as low as DM3300/tonne in September. One producer said he expected to see prices increase by an additional 10% over the next two quarters. Dow confirmed it had expected to start up its newly expanded 135 000 tonne/year MDI Stade unit in early September, but technical hiccups saw this plant's start-up delayed until the start of October.
Meanwhile, Enichem's Brindisi unit was down for much of August and September, first for maintenance and later for a debottlenecking to raise capacity by 10 000 tonne/year. The Italian producer has actively been sourcing material from outside sources. Scheduled shutdowns in the October-November timeframe, including two to three weeks at BASF's Antwerp unit and a two week shutdown at Dow's Estoril unit in Portugal, will exert further pressure on inventories.
An upturn in European MDI markets will undoubtedly have repercussions elsewhere. European producers say they will have reduced availability for Far Eastern markets, removing some of the downward pressure on prices in the region. Players are already reporting more stable MDI markets in the Far East and are encouraged by Japanese producers recent announcement of increases of Yen20/kg ($0.18/kg).
However, industry sources say the increase is mainly to compensate for a weaker yen relative to the dollar. A questionmark continues to hang over US markets. Producers there are currently offering a temporary voluntary allowance (TVA) of 5 cent/lb on MDI prices, but this is due to expire at the end of the year.
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