Europe acetone MMA contract discussions at a stalemate

19 March 2009 16:21  [Source: ICIS news]

By Julia Meehan

LONDON (ICIS news)--March acetone methyl methacrylate (MMA) contract price discussions were at a stalemate this week, with producers and consumers refusing to move from their original targets, market sources said on Thursday.

“There are no developments on the acetone contract and we are still wide apart,” said a major acetone buyer who purchases for the production of MMA. “Acetone producers just want to focus on the propylene contract price and not developments in the propylene spot market... when I look at propylene spot prices they have fallen dramatically.”

The propylene contract price settled in March at €497/tonne ($672/tonne) FD (free delivered) NWE (northwest Europe), which marked an increase of €42/tonne over February.

According to global chemical market intelligence service ICIS pricing, spot chemical-grade propylene was valued at €390-410/tonne FD NWE at close of business on 13 March.   

Following the March propylene contract settlement, some European acetone producers announced that they would be pushing to recover the full propylene price increase of €42/tonne for monthly acetone contracts, while others reported that they were hoping to recover at least €35/tonne.

“There has been no development on the [acetone MMA] contract and we are still fighting for €42/tonne,” said one supplier. Another producer said: “There is no news relating to the contract because we are in disagreement, but we are pushing for €35/tonne.”

Developments in the propylene market weigh heavily on the outcome of the acetone MMA contract price discussions. However, supply and demand dynamics also play a major part in freely negotiated contract negotiations.

The increase in the propylene contract price arrived at a time when the value of MMA had come under intense pressure from the downturn in the automotive and construction industries, which account for nearly 80% of MMA production.

MMA spot prices had been falling in Europe on a weekly basis, with spot MMA valued some €225-265/tonne below the first-quarter contract price that was agreed at a pre-discounted €1,425-1,485/tonne FD NWE.

“MMA contract buyers will want to see this reduction in the second quarter and it is impossible for us to pass the raw material costs on,” said a major MMA producer.

Another major MMA producer said: “MMA and PMMA [polymethyl methacrylate] is under so much pressure we just cannot accept an increase in acetone, so I am gunning for a rollover as my starting point.”

Meanwhile it was suggested by some sources in the acetone community that a joint March and April contract price might be a “fair solution”.

“It might be an idea to see what happens with propylene next week and if the contract price falls maybe we could come to some solution,” said a producer.

While contract price discussions continued, so did debate surrounding whether the European acetone market was tight or not.

Operating rates on phenol/acetone had been reduced since the middle of 2008 on poor demand for phenol derivatives, particularly bis-phenol A (BPA) and caprolactam. Current operating rates for phenol and its by-product acetone are estimated to be around 50-70%, depending on source.

INEOS Phenol, the major global producer, confirmed that it continued to run its European phenol/acetone facilities at 50%, largely as a result of the downturn in the automotive sector.

CEPSA Quimica, the second largest global producer of phenol/acetone, recently increased its production to 70% in Huelva, Spain.

Owing to more favourable selling opportunities for export, both of these producers and others had chosen to export acetone out of Europe to Asia and South America in recent weeks.

“If we are in the midst of our acetone suppliers selling to other regions, then they should be careful,” said one large European acetone buyer. “If they chose to do this, then we will buy our acetone elsewhere.”

The source concluded by saying: “The most important thing is if customers can’t pay more for MMA, then I can’t pay more for acetone.

“I’ll either not settle or not sell.”

($1 = €0.74)

For more on acetone visit ICIS chemical intelligence
Read Paul Hodges’ Chemical and the Economy blog
To discuss issues facing the chemical industry visit ICIS connect

View an archived ICIS webinar on solvents here





By: Julia Meehan
+44 20 8652 3214

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