15 October 2009 11:03 [Source: ICIS news]
LONDON (ICIS news)--European fourth quarter melamine contracts were likely to settle up in the coming weeks due to a tight market and strong demand putting producers in the driving seat, sources said on Thursday.
Sellers had originally targeted increases of €80-110/tonne ($119-164/tonne) for the new contracts, arguing that supply was reduced while demand showed clear signs of picking up.
Producers also said they needed to recover at least some of their margins after contracts had seen decreases of more than €600/tonne since the start of the year.
“I have settled 60% of my fourth quarter contracts already, and the future looks even more promising,” a producer said.
The seller explained that the majority of its contracts were agreed at increases of €90/tonne or more, which would bring real values up to €930-1,100/tonne, depending on volume and where third quarter contracts were settled. The source said strong demand and “dramatically low stock levels all across the chain” had turned the market more bullish.
Another producer confirmed it had settled some of its contracts at increases of €80-110/tonne while a further seller echoed it had settled a handful of contracts at higher levels, although it did not yet want to specify the amount, considering further negotiations were still needed.
Although most players agreed that demand in the fourth quarter had proven to be strong so far, several sellers said they were uncertain about the sustainability of this into the new year.
Some said that the pick up in demand was only marginal and that urea prices were still weak, which meant steep increases for the fourth quarter were not viable.
One buyer said that it expected further decreases during the holiday period in December due to several downstream shutdowns, also noting further downward pressure in the new year when several new plants in the Middle East and the ?xml:namespace>
This was echoed by another major buyer who said it had not settled any of its contracts yet because it could not accept these steep increases when a lot of foreign material was expected to flood the European market within six months. This consumer said it would accept increases of €40-60/tonne at most.
Some buyers did confirm settling parts of their contract, though. One consumer confirmed it had settled 70% of its contracts at increases of €110/tonne, bringing fourth quarter values to €920-930/tonne, while another buyer also agreed about 70% of its contracts at increases of €50-80/tonne. This source said it would bring real values for the fourth quarter to €850-950/tonne.
Another buyer said it had only agreed smaller volumes at smaller increases and did not want to disclose any further expectations yet, while at least two major consumers had not settled any contracts yet.
Sources were hopeful they would settle the remainder of their contracts as soon as possible.
Third quarter European melamine contracts were agreed at €800-900/tonne FD (free delivered) NWE (northwest
($1 = €0.67)
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