Ike will have mixed effect on US acrylates

19 September 2008 22:11  [Source: ICIS news]

HOUSTON (ICIS news)--The shutdown of acrylates plants along the Texas Gulf coast ahead of Hurricane Ike has tightened supply and led at least one producer to implement sales controls, but buyers said on Friday that they still expected near-term prices to weaken.

Upstream pressure moved prices for acrylic acid and the esters up by 22-29 cents/lb ($485-639/tonne, €340-447/tonne) since late June, according to data from global chemical market intelligence service ICIS pricing. Second-quarter prices for glacial acrylic acid remained posted at 110-114 cents/lb pending the outcome of September negotiations.

Price-increase momentum has waned, however, as customers have begun to push for rollovers or price declines for September due largely to weakening energy prices.

Most said storm outages might return upward price pressure to the market for a week or two, but not beyond that. Although some September contracts had begun to settle flat, many buyers were still expecting prices to fall before the end of the month.

However, one distributor said fourth-quarter pricing was unlikely to fall, as many had predicted before the storm. The outages mean "high prices are here to stay for a bit longer", he said.

Although little or no damage to the actual plants was reported from Hurricane Ike, which blew ashore early on 13 September, sellers said problems such as limited power supply, manpower and water-treatment functions were hampering restart efforts.

However, a reported decline in demand for some of the esters, especially from the architectural coatings market, will keep downward pressure on pricing, some buyers said.

"I think during September we're going to see price relief of 3-5 cents/lb for 2-EHA [2-ethylhexyl acrylate]," a buyer said this week. Some buyers have clamoured for larger decreases in acrylic acid and the other esters.

"With weakening upstream costs and flattening demand, I really don't see producers having the ability to maintain the positions they have now," a buyer said. "But the sad truth is that producers still have not seen prices reach reinvestment levels."

Despite that concession, the buyer said the market is not being kind to either buyers or sellers, adding that for the foreseeable future, "I don't think either side is going to get what they want or deserve".

US producers of acrylic acid and acrylate esters include Dow Chemical, Arkema, Rohm and Haas, BASF and Sasol.

($1 = €0.70)

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By: Larry Terry
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