MMA players push for hikes

04 August 2003 00:00  [Source: ACN]

Asian methyl methacrylate (MMA) producers were pushing for September price hikes last week on estimates of continued strong demand growth, particularly from the polymethyl methacrylate (PMMA) segment, and tight supply.

In addition, a Japanese MMA trader claimed buyer inventories were low.

But some of the PMMA producers, who consume 60-70% of Asia's MMA output, said they could not afford the proposed cost hikes because they had been unable to achieve PMMA price increases this year.

The remainder of the MMA production is consumed by the transparent-ABS sector and the newly emerged methacrylate styrene (MS) segment.

And the PMMA players pointed out that although full-year demand growth might still be good, their sales dipped during April and May because of Sars (severe acute respiratory syndrome) and the Iraq war.

Falling MMA feedstock costs and therefore very healthy deltas for MMA producers compared with those for the PMMA players were also used as arguments against the proposed hikes.

But there was a consensus that the demand- and-supply balance was in favour of the MMA producers.

One Japanese MMA producer had increased its spot offers to US$1400/tonne cfr China/Korea for September cargoes, up from its US$1300/tonne cfr China/Korea settled price for August.

The producer's August prices were a rollover of its July prices. However, the July prices represented a US$100/tonne increase from June.

Also, a second Japanese producer and a South Korean producer were looking to increase their prices to US$1500/tonne cfr NEA for September consignments, up from the US$1400/tonne cfr NEA they had settled for August.

However, the Japanese trader said achieving a price increase of more than US$30-50/tonne would be difficult, as the producers would face considerable resistance from customers.

Part of the justification for the attempted MMA hikes is the 5-7% Asian demand growth for 2003 over 2002 which has been forecast by MMA producers in Asia, much of which would come from the PMMA segment. This would be the same as the demand growth from 2001-02.

Sumitomo Chemical, the No1 MMA producer in Asia with a total capacity of 323000 tonne/year in Japan, Singapore and South Korea, forecast a 5-6% demand growth.

It predicted robust demand from transparent ABSand liquid crystal display (LCD)producers.

Formosa Plastics Corp (FPC) and several other Asian players were even more bullish: they predicted that demand growth this year could be up to 7%.

Kuraray expects that demand for PMMA from the LCD sheet sector will grow by 100% in 2003 over 2002, while it predicts that demand from the LCD resin sector will rise by 30-40%.

PMMA is also being increasingly used in the automotive sector for products such as tail lights, and in the construction industry for products such as glazing material.

Transparent ABS is used extensively in the information technology industry for computers and other equipment. It is also used by the construction industry for production of artificial marble.

However, one Japanese PMMA producer pointed out that prices for PMMA had remained at US$1600/tonne cfr China since the beginning of this year because of Sars and the Iraq war.

But the producer plans to push for a price increase of US$100/tonne cfr China in Q4, 'if monomer prices continue to rise'.

According to the producer, non-integrated PMMA players require a spread of at least US$350-400/tonne between PMMA prices and MMA costs.

Last week, this producer's spread was only US$200-250/tonne.

MMA producers, in contrast, last week enjoyed a spread of US$600/tonne - double the minimum required, said an industry source.

Their deltas had been improving on falling methanol and acetone feedstock costs (see chart).

Methanol prices were at US$230-240/tonne cfr Taiwan last week, and acetone was at US$560-570/tonne cfr Taiwan.

The MMA producers ACN spoke to admitted they had been enjoying good spreads lately, but said earlier this year, they had encountered high raw-material costs.

However, PMMA producers countered that, even when methanol and acetone prices were at their highest levels so far this year, MMA producers had enjoyed a more-than-comfortable spread of US$500/tonne.

But on the side of the MMA players was tight supply.

In Q1 2003, for instance, FPC reduced the operating rate at its 70 000 tonne/year plant in Taiwan to 30-50%, due to a mechanical problem.

According to an FPC source, the company raised its operating rate to 80-90% in Q2, and hopes to achieve full capacity utilisation in Q3.

And the Japanese trader said the total MMA inventory in Japan was at an unsustainably low level of 15-20 000 tonne. The ideal inventory level is 50 000 tonne. - Prema Viswanathan

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