OUTLOOK '06: US MMA demand to rise amid tight supply

10 January 2006 20:41  [Source: ICIS news]

By Heather McGuire

HOUSTON (ICIS news)--Demand for US methyl methacrylate (MMA) is expected to remain bullish in 2006, with prices forecast to be around the $1/pound ($2,204/tonne) range and rising on the back of tight regional supply, according to traders and producers.

Signs were evident towards the end of 2005 that MMA producers faced an uphill task in keeping buyers satisfied for 2006 as tight supplies, production disruptions and a growing appetite in Asia Pacific left many buyers scouring for cargoes.

Sellers anticipate improved demand from end-users once hurricane recovery dollars hit the reconstruction industry along the US Gulf Coast.

Construction and remodelling activity, as well as automobile production, strongly affect US consumption of MMA in acrylic sheet, moulding and extrusion compounds, and surface coatings. These applications account for 80% of MMA consumption, and demand for these markets is greatly influenced by general economic conditions.

In Asia, flat screen TV and LCD manufacturers are consuming MMA at a higher rate than ever before and relying on the US for their supply needs.

“The MMA market is growing so fast, you’d need a world class MMA plant built every 10 months in 2006 to keep up with the heavy demand,” an MMA producer said.

Production issues and post-hurricane logistics at three major MMA suppliers’ plants resulted in diminished supplies during second, third and fourth quarter of 2005. Following hurricanes Katrina and Rita, three major MMA plants were down for two weeks or more. The storms disrupted production at Cyro's Plant in Avondale, Louisiana, Lucite's plant in Beaumont, Texas and Rohm and Haas' plant in Deer Park, Texas.

Meanwhile, upstream acetone, propylene and natural gas prices increased, driving up the cost to produce MMA. The 10-year average cost for natural gas until 2003 was around $2.50 (Euro2.07)/m Btu until 2003. Following the hurricanes, it jumped to $15. Acetone, had peaked at 25 cents/pound prior to last year, jumped to 38.50 cents/pound at the end of 2005.

Hurricane-related issues have been resolved but producers are now restoring margins that eroded after the storms on the Gulf Coast.

MMA settled up 6-10 cents/pound in the fourth quarter. For the first quarter of 2006, producers announced an additional plus 8-9 cents/pound.

Some MMA buyers said the nominations of 107.5-124.5 cents/pound ($2,369-2,744 or Euro2,004-2,322/tonne) free delivered (FD) railcar and 109.5-126.5 cents/pound tank truck would not hold and were anticipating a rollover of fourth quarter prices.

Producers said that higher crude values, firmer MMA feedstock costs and tight supplies were reasons another increase is necessary and expect more increases throughout 2006.

Producers viewed the latest reports on the US economy from the Commerce Department as supporting a stronger 2006 MMA market.

The Commerce Department recently announced annualised construction spending in November 2005 showed a 0.2 % increase from revised October figures. When compared with November 2004, the increase was 7.8 %. For the year to date, construction spending was 9 % above the same 11-month period in 2004. Increases in spending for the office, commercial and educational construction sectors more than compensated for stable to lower residential outlays.

By: Heather McGuire Doyle
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