Oversupply sustains Europe PC profit pressure

12 December 2007 17:40  [Source: ICIS news]

By Sofia Lind

LONDON (ICIS news)--Producer confidence in a hike on European first-quarter polycarbonate (PC) contracts was lacking due to market fundamentals favouring buyers, players said on Wednesday.

Manufacturers had targeted an increase of €0.10-0.15/kg ($0.15-0.22/kg) for the next quarter, stating that PC prices had not kept up with the rising costs of raw material, gradually eroding margins.

A healthy supply of material in the European market, as well as competition from constantly present Asian players, now threatened to undercut this aim, according to buyers and sellers.

“The (European PC) market is growing, but not as fast as new capacity,” one European seller said.

“Europe is struggling, next year will be a difficult year for PC and I expect margins to stay at these levels”, it added.

The seller thought a change in fundamentals could come be forced on the market.

“I am hoping it will come to a point where people will choose not to sell material or reduce run rates,” the supplier said.

A buyer agreed, saying: “The market is very long, it will be very difficult (for manufacturers) to increase prices unless they cut production rates.”

First-quarter contract discussions were just about to begin in earnest, according to suppliers and consumers.

One buyer of PC for bottle manufacture said that although it acknowledged that feedstock costs were sharply on the rise, gradually increasing PC prices over the last years had also meant difficulties in downstream markets.

It would search thoroughly for the most competitive first-quarter price opportunity.

“I have received interesting Asian offers. They are buying their feedstock in weaker US dollar markets and can be more competitive,” the buyer said.

European prices of PC in the fourth quarter were in a range of €2.96-3.21/kg FD (free delivered) NWE (northwest Europe) for GP (general purpose) moulding material and in a range of €2.91-3.16/kg FD NWE for GP extrusion, according to global chemical market intelligence service ICIS pricing.

European manufacturers of PC include SABIC, Bayer and Dow.

($1 = €0.68)

By: Sofia Lind
+44 20 8652 3214

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