FocusEurope polycarbonate players eye move to monthly contracts

17 February 2010 17:49  [Source: ICIS news]

By Mark Victory

LONDON (ICIS news)--Many European polycarbonate (PC) players are in the process of moving from quarterly to monthly contract negotiations, because of volatility in the market resulting from the global economic recession, buyers and sellers said on Wednesday.

“There are monthly contracts in a lot of other markets, PC will follow. People were used to having a stable market for three months but this has changed. The market is now volatile,” said a major buyer.

The move to monthly pricing came in the wake of the increased volatility of feedstock bisphenol A (BPA) prices.

From April 2007 to September 2008, BPA contract prices were largely stable, trading at a minimum of €1,430/tonne ($1,959/tonne) FD (free delivered) NWE (northwest Europe) and a maximum of €1,560/tonne FD NWE, according to data from global chemical market intelligence service ICIS pricing.

From October 2008 to February 2010, however, prices hit a low of €850/tonne FD NWE and a high of €1,480/tonne FD NWE.

PC prices were unable to react quickly enough to feedstock movements in 2009 due to quarterly pricing, buyers and sellers said.

Quarterly pricing also meant that prices were slower to react to returning demand, which began in the fourth quarter of 2009, due to a recovery in the major end-use automotive industry, sources added.

The result was price confusion in the market, which was seen in the wide range of reported deals done in the small-volume spot market, where prices were reported as low as €1.50/kg and as high as €3.45/kg, although buyers and sellers viewed both of these prices as extremes.

In order to react more swiftly to market movements, many players were now in the process of, or considering, migrating from quarterly to monthly pricing.

“We’ve already stepped away from quarterly contracts in extrusion grade [PC] material. Even our quarterly contracts now sometimes move mid-quarter. Optical and electrical grade [PC] will soon follow,” said a major producer.

A small number of players said they remained unconvinced of the need to move to monthly contracts, questioning whether monthly orders would allow them to manage stock properly.

Importers said they were also concerned over whether they would be able to move to monthly pricing because of the necessary lead times to ship materials.

“I suppose our competitors are able to move to monthly prices, but I don’t know if…importers will be able to follow. We have our lead times,” said an importer.

($1 = €0.73)

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By: Mark Victory
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