Steep Sept US acrylates price push ‘irrational’ - buyers

03 September 2009 20:52  [Source: ICIS news]

HOUSTON (ICIS news)--Nominated increases for US acrylates widened to 6-14 cents/lb ($132-309/tonne or €92-216/tonne) for September contracts, prompting buyers on Thursday to call the hikes irrational.

Most producers sought across-the-board hikes of 6 or 10 cents/lb, effective on 1 September. But one seller nominated increases of 12 cents/lb for glacial acrylic acid (AA), ethyl acrylate (ethyl-A) and methyl acrylate (methyl-A); 13 cents/lb for butyl acrylate (butyl-A) and 14 cents/lb for 2-ethylhexyl acrylate (2-EHA).

Feedstock chemical-grade propylene (CGP) was the market’s primary price driver, as year-over-year demand was still down by double digits, buyers and sellers said.

Indeed, September CGP contracts settled at 55.50 cents/lb this week, up by 12 cents/lb.

Nonetheless, many customers called the September range “irrational” since monthly contracts are typically based on the previous month’s feedstock prices. August CGP contracts rose by only 4 cents/lb.

Even factoring in September’s CGP settlement, more than one buyer said the high-end nomination for 2-ethyl hexyl acrylate was excessive and questioned the producers’ mathematics.

“If you do the math, you can see that with a 12 cent/lb propylene increase, it will cost 11 cents more or so to make butyl-A or 2-EHA,” one buyer said. “So the variable cost … in September is up by that amount.”

One buyer suggested producers miscalculated in August by allowing mostly rollovers. “Now they find they are behind and have to catch up,” he said.

A producer said its nominations stemmed from an effort to take a current-month approach, aligning feedstock costs with monomer pricing rather than maintaining the historical lag between the two.

A larger buyer said the approach was unfair and impractical.

“What happens in months when propylene doesn’t settle until the third week?” the buyer asked.

“Customers usually wait until they know what propylene is going to do anyway,” the buyer said, “so why would producers risk needlessly angering their customers?”

Another buyer said customers would stall settlements “until they have a raw material position that really works for them. Buyers won’t begrudge sellers what they’re due, but they will begrudge them an advantage.”

US producers of acrylic acid and acrylate esters include BASF, Dow Chemical and UCAR Emulsion Systems & Monomers.

($1 = €0.70)

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By: Larry Terry
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