OUTLOOK '06: No improvement for Euro fibre intermediates

29 December 2005 09:29  [Source: ICIS news]

By Benjamin Purvis

Acrylic fibres are used in carpetsLONDON(ICIS news)--Next year looks set to be another disappointing year for European fibre intermediates following a lacklustre 2005, as few players were confident that there would be any great improvement over the next twelve months.

While producers in some sectors made slight gains last year, the majority have seen margins steadily eroded amid large fluctuations in feedstock prices, and this was expected to continue.

Acrylic fibre producers are faced with stiff competition from Asia and are under increasing pressure from alternative fibres such as polyesters and cotton. As a result, producers of acrylonitrile and downstream products are struggling to maintain margins in the face of rising propylene and ammonia costs. In 2005, rising acrylonitrile costs forced one downstream producer to shut down for around a month during the summer, and there has been talk that production could again be curtailed in 2006. 

Acrylonitrile and propylene prices 2005 (in Euro/tonne)

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European nylon producers are also struggling to pass on raw material price hikes, and margins over caprolactam have fallen by more than Euro100/tonne since January 2005. Downstream from nylon 6 virgin polymer, the textiles, yarns and fibres sectors have been especially weak, and sellers estimated a 20-40% fall in mid-year demand between 2004 and 2005.

Producers seemed more optimistic about 2006, but buyers were not so sure. Much will depend on Asian markets, which were very weak in 2005, and benzene price stability in Europe, market sources said.

Nylon and caprolactam prices 2005]


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Producers of polyethylene terephthalate (PET) had a difficult 2005 in a market that was oversupplied and showed few signs of improvement. Demand was described as weak throughout the year and several major price intitiatives by producers amounted to little. Quite a few producers have struggled to pass through increases on paraxylene (PX), and margins have been eroded by an estimated Euro25-30/tonne in the past twelve months.

The main squeeze was felt by PET resin producers, caught between struggling PET converters and producers of purified terephthalic acid (PTA), one of the few groups to derive much benefit from 2005. While overall volumes were under downward pressure, PTA producers managed to extract some small margin increases on top of paraxylene changes.

Price comparison for PET, PTA* and PX in 2005 (in Euro/tonne)


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*Please note: The PTA price for December had not been settled at time of going to press.

In Western Europe, PET offtake was well below capacity and several producers were operating at reduced output for much of 2005. This long market situation looks set to continue in 2006, as the centre of European PET production continues to migrate east and price pressure from Asia grows.

While major Western European producers such as Voridian, Advansa, Invista and Equipolymers are competing quite strongly at the moment, there were many who felt that smaller producers could be put at risk by this move east.

2005 saw the opening of new PET capacities in Poland and Lithuania, and this growth looks set to continue in 2006 and beyond (see table below). With markets expanding east of the old Iron Curtain, these new enterprises are confident that there will be sufficient demand for new PET capacities. Whether this is true or not will be seen over the next few years. And there are doubts about the long-term viability of some producers, both new and old.        

New PET and PTA capacities 2005-06

Company

Location

Capacity

(tonne/year)

Product

Status

SK Chemicals

Wloclawek, Poland

120,000

PET

Started March 2005

Neo Group

Klaipeda, Lithuania

155,000 (unit 1)

PET

Started November 2005

155,000 (unit 2)

PET

Due onstream Q1 2006

OAO Polief

Blagoveschensk, Russia

115,000 (unit 1)

PTA

Started November 2005

115,000 (unit 2)

PTA

Under development

120,000 (unit 3)

PET

Under development

Selenis

San Giorgio di Nogaro, Italy

30,000-40,000*

PET

Due onstream January/February 2006

Portalegre, Portugal

20,000*

PET

Europlast

Solnechnogorsk, Russia

90,000

PET

Due onstream January 2006

90,000*

PET

Due onstream 2008

Orion PET (a subsidiary of Indo Rama)

Klaipeda, Lithuania

200,000

PET

Due onstream Q1  2006

PKN Orlen

Wloclawek, Poland

600,000

PTA

Announced 2005, due onstream 2009

*expansion of existing plant

With European players taking something of a backseat role in the global fibres market, Asia remains the key to any possible pick-up in demand and pricing. With small turnarounds already noted in PET and PTA, some producers of fibre intermediates insisted that 2006 would be better. However, the majority of buyers and sellers said that it was still too early to tell whether or not there would be a genuine market recovery in 2006.

Rachel Robson and Giovanni Coiro contributed to this article.


By: Benjamin Purvis
+44 20 8652 3214



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