FocusUS formaldehyde demand still sluggish

24 January 2008 22:21  [Source: ICIS news]

HOUSTON (ICIS news)--US formaldehyde demand has been exceedingly slow in December and January as particle board and plywood manufacturers react to the downturn in US housing construction, several feedstock methanol buyers in the formaldehyde sector said on Thursday.

“Basically we’re just looking at making the formaldehyde we need as we need it,” a source said. “We’re definitely running slower than we have been in the past couple of years.”

Formaldehyde industry sources expected only slow demand pickup, if any, in February.

The weak formaldehyde sector was cited as a factor in the recent decline of US methanol spot prices, although a methanol producer said on Thursday that higher methanol industry operating rates were the main driver.

A January barge traded on Wednesday at $1.55/gal ($516/tonne) FOB (free on board) USG (US Gulf), down by 50 cents (24%) from a deal at the beginning of the month, according to global chemical market intelligence service ICIS pricing.

Methanex chief executive Bruce Aitken estimated the US housing slowdown had knocked out about 200,000 tonnes/year of methanol demand, which he said was a minor part of the nearly 40m tonne/year global market.

The impact of weaker formaldehyde demand was somewhat mitigated by robust methyl tertiary butyl ether (MTBE) requirements amid strong pricing for the fuel additive, Aitken said.

“MTBE customers are drawing maximum contract volumes in the current pricing environment, so we’ve seen some offsetting impacts that we never anticipated,” he said.

Spot prices for US MTBE were at 289-294 cents/gal on Thursday, compared with October 2007, when prices dipped to 205 cents/gal.

A US MTBE producer noted strong demand was heard coming from Latin American countries, especially Venezuela.

Additional reporting by Steven McGinn.

By: David Barry
+1 713 525 2653

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly