FocusUS MA market eyes impact of Huntsman's new plant

17 June 2009 20:47  [Source: ICIS news]

By Ryan Hickman

HOUSTON (ICIS news)--US maleic anhydride (MA) market was waiting to see what impact Huntsman's new plant in Geismar, Louisiana, would have on an oversaturated market, market participants said on Wednesday.

"Huntsman is the one in the driver's seat," said a source who imports MA into the US. "Depending on how Huntsman acts, that's how the market will move."

Huntsman already has a grasp on around 35% of the North American market with its 243m lb (110,000 tonnes/year) plant in Pensacola, Florida.

The producer was to start up a100m lb/year (43,359 tonne/year) single reactor facility in Geismar during the last week of June.

The company announced plans for the new plant nearly three years ago.

The extra capacity in Louisiana would bump the company's market share to about 43%, according to the company.

The short-term expectation from some market sources is that the extra capacity would neutralise any upward price pressure as a result of strengthening butane values in the US.

Huntsman has said it would take some time for the Geismar facility to run at full rates and would adjust output at both its US plants to meet customer demand.

But other market participants were in a wait-and-see stance, saying Huntsman's moves could result in depressed prices, loss in market share for other producers and possible consolidation.

Another outlook is that the market knew the extra capacity has been coming for years and prices adjusted accordingly at the beginning of the year when most contract prices fell by 7 cents/lb ($154/tonne, €111/tonne), according to global chemical market intelligence service ICIS pricing.

Current US MA contract prices have not changed from early February, when values fell by another 3 cents/lb, even though US butane prices have been above $1/gal since the start of the month. The posted range for US MA contract prices was 59.20-65.20 cents/lb, according to ICIS pricing. 

The US MA market has been stymied by the drastic slowdown in the unsaturated polyester resins (UPR) sector, which relies heavily on the depressed automotive, marine and housing markets.

Sluggish demand for MA has brought total market capacity above US demand, with some producers battling to keep market share.

The worst-case scenario for smaller producers is that Huntsman's overwhelming capacity could dictate market share and ultimately their future in the MA business.

However, a market source said it believed Huntsman would refrain from gobbling up additional market share in the short-term.

No new US contracts are scheduled to be renegotiated in the middle of this year.

Others in the market pointed to the end of 1994 and start of 1995, the last time new grassroots capacity emerged in the US, as an example of what could happen now.

That was when Lanxess started up its 120m lb/year (now 160m lb/year) plant in Baytown, Texas and MA prices sank as a result.

One market source said that with no turnaround in the foreseeable future for the UPR market, prices could not get much lower.

Exporting additional MA is a possibility for Huntsman. However, sources have said such action could conflict with plans to increase capacity at a joint venture MA plant in Moers, Germany. The Sasol-Huntsman joint venture plans to increase its capacity from 60,000 tonnes/year to 105,000 tonnes/year by 2011.

But if Huntsman decides to keep its US production rates at a level that outpaces its demand, the market would be forced to adjust accordingly.

Then it would be "time to take off the gloves", one market source said. 

Major US MA producers include Huntsman, Lanxess, Marathon and Flint Hills Resources. Bartek manufactures MA in Canada, and Idesa sells MA from Mexico.

($1 = €0.72)

For more on Huntsman's Geismar, Louisiana plant, visit ICIS plants and projects
For more on maleic anhydride visit ICIS chemical intelligence 
To discuss issues facing the chemical industry go to ICIS connect

 

By: Ryan Hickman
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