13 May 2010 18:04 [Source: ICIS news]
LONDON (ICIS news)--While the floundering euro grabs headlines across the globe, its decline is also snatching away European chemicals buyers’ margins, sources said on Thursday.
The embattled currency, which has fallen 8% against the US dollar in the past month, has made it harder and more expensive for European buyers of a whole raft of chemicals to get the material they need from abroad. At the same time, it is making European product more attractive to foreign buyers, thereby exacerbating tightness in markets that had been already short.
The euro has also lost roughly 7.5% against the yuan in the past month amid concerns over the ability of
In markets such as vinyl acetate monomer (VAM), acetic acid and mono ethylene glycol (MEG), and downstream polyethylene terephthalate (PET), which rely on imported volumes from the US,
“We haven’t seen any imports because we are afraid of the euro [rate change] against the US dollar,” said one PET producer.
“These macro economics are out of our control - we have no choice but to try and increase prices,” a VAM manufacturer said.
For other products, such as plasticisers, acrylate esters, adipic acid and oxo-alcohols, buyers are generally less reliant on imports. But in the current environment, where tightness has pressured both prices and downstream production, the euro’s precipitous decline is yet another stressor in an already nightmare-like scenario.
Until recently, three out of the four major European producers of acrylate esters had production outages, driving one of them, Arkema, to declare force majeure. At the same time, an even more chaotic supply situation in the US has siphoned European material to that market, pressing spot prices for butyl acrylate up €1,345/tonne ($1,703/tonne) on average since the beginning of the year, to €2,350-2,500/tonne ($2,975-3,165/tonne) FD (free delivered) NWE (northwest Europe).
“We already have a lot of movement into the
The currency fluctuation may also have a trickle-down effect by making feedstock chemicals more expensive and harder to source. For example, in the olefins market, traders were holding on to their cash rather than buying ethylene or propylene from overseas markets, as they would risk potential losses if euro-priced products failed to sell at prices high enough to offset costs.
“Right now (there is) a very high level of uncertainty” one trader said.
The euro’s drop is not dour news for all chemical industry players in
Sellers also noted the instant currency exchange related gains realised by exporting material at the same prices they commanded before.
“If one good thing came out of the
A high density polyethylene (HDPE) exporter echoed a similar sentiment.
“I am very happy about last month’s export deals,” the exporter said. “We did them in dollars and now they are worth more in euros.”
($1 = €0.79)
Vinicy Chan, Jane Massingham, Julia Meehan, Linda Naylor, Amandeep Parmar, Caroline Murray and Nel Weddle contributed to this story.
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