BPA sector hit by falling demand

11 March 2002 00:00  [Source: ICB]

Bisphenol A (BPA) prices have been severely impacted by the 'disastrous' state of polycarbonate demand in recent months. Quarter one contracts settled at E950-1150/tonne, having dropped by over 10%, according to market players. Spot BPA prices have also fallen to E850-900/tonne, remaining well below contract level.

Bisphenol production has been reduced significantly in response to the downturn in demand. Market observers pinpoint an average operating rate at 70%, and see no imminent sign of change. There is still 'far too much product around despite producers' attempts to control availability', says a buyer. This has partially come from eastern European imports, although Russian exporters see little incentive to sell into western Europe at the current low levels.

A small improvement in BPA sales was felt in January, although this is due to restocking, rather than an upturn in actual demand, say market players.

Looking forward, sellers detect 'positive messages from Asia', but remain only cautiously optimistic. A hike in benzene contracts would lead to higher phenol prices and a further squeeze on already strained BPA margins. Suppliers are keen to ensure that any increase in feedstock costs is reflected in quarter two BPA contract prices. However, buyers will push for a roll-over because supply/demand dynamics remain unchanged.

Quarter four BPA contract prices fell by approximately 12% to E1120-1280/tonne, pressurised by high consumer stock levels. A prolonged period of destocking from April until the end of 2001 left demand for BPA - particularly from the polycarbonate sector seriously weakened. 'European BPA volumes in quarter four were reasonably good for epoxy resins but polycarbonate was a total disaster', admits one supplier.

However, epoxy resin markets have seen dwindling prices, intensified by competitive imports from Asia and subsequent battles for market share. Sales have picked up on quarter four, but there is still a 'dramatic difference' between now and the same period in 2001, say producers.

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