10 June 2010 17:53 [Source: ICIS news]
By Libby George
LONDON (ICIS news)--Expectations for lower summer prices in the troubled European acrylates market are slipping away, to be replaced by chaos, confusion and acrimony, market sources said on Thursday.
After fours months of triple-digit increases to freely negotiated contract prices – bringing them up by more than €600/tonne ($723/tonne), or 53%, on average since the beginning of the year – beleaguered buyers expected a relief in July figures.
However, the market remains tight, squeezed by production hiccups and high demand, and many say that the anticipated relief could be slipping away. Now, sellers and traders share rumours of issues at plants and delayed deliveries, and buyers express outrage over continual troubles getting what they need.
Questions over summer prices and supply are now dividing buyers and producers alike, with some buyers expecting further increases and some sellers saying that prices have reached their peak.
“I thought that when Arkema was back on stream, everything will be good,” one seller said. “But now…I don’t know what’s going on. There is a tension in the market. If something [production-related] happens, immediately it is critical.”
Arkema’s Carling, France, plant went down unexpectedly in late March, and it declared force majeure on deliveries from 11 April until mid-May. However, since then it has been running at full capacity for more than a month, without making a real dent in the European shortage.
Some buyers were so confident that relief would come that they are still negotiating June contract rates with sellers. As a result, the prices have not yet been settled – but are set to do so with yet more triple-digit increases. Despite this, the aforementioned supplier, and one other that sells in Europe, said that freely negotiated contract prices would not increase again in July.
“Customers cannot stomach higher prices,” the second seller said, indicating it would nominate a price rollover in July freely negotiated contracts. “They’ve really been beat up with the prices, and we’ve been getting a lot of pushback.”
May freely negotiated contract prices for butyl acrylate were settled at €1,750-1,860/tonne FD (free delivered) NWE (northwest Europe), according to global chemical intelligence service ICIS pricing. Meanwhile, methyl acrylate is €1,700-1,850/tonne; ethyl acrylate is €1,740-1,880/tonne; 2-ethyl hexyl acrylate is €1,920-2,000/tonne; and acrylic acid is €1,690-1,850.tonne. All are set to increase in the range of €120-150/tonne for June contracts.
Certain customers agree that this is the peak – and insist that imports from Asia en route to Europe at lower prices will bolster their argument for a rollover. They say supply, while still snug, is easing slowly, and that between this perceived let-up in tightness and stabilising supplies of feedstock propylene and oxo-alcohols, prices should, at a minimum, roll over in July.
That view, however, is far from the consensus. Other sellers are already formulating proposals for increases to July freely negotiated contracts and have serious doubts over buyers’ abilities to resist them. With reports percolating about cancelled deliveries in June, sky-high spot purchases and Asian prices that are still too high to import cheaply, customers might be on the hook for even longer.
“There is no material available and there is no price decrease,” one buyer said. “From my point of view, until the end of August, there is no relief.”
Dow has still not been able to bring its 80,000 tonne/year plant in Boehlen, Germany, fully back on stream. Meanwhile, Dow and other sellers’ stocks have been shrinking because of various small production troubles that would normally not be felt by customers. One seller has reportedly been seeking product from other suppliers in order to meet its obligations, and a second has reportedly cancelled deliveries, driving its consumers to an even higher-priced spot market.
Additionally, while contract price increases in the US abated in June, spot sales, some as high as $4,400/tonne FD (€3,652/tonne), remained above European figures. And while prices for Chinese material dropped by triple-digits this week, butyl acrylate remains at $2,450-2,500/tonne CIF China main port – too high, traders said, to make a real dent in European prices.
“The prices in Asia still do not allow cheaper imports, and obviously, the exchange rate isn’t helping,” one trader said. “As long as the prices outside Europe are higher than within Europe, you’re going to continue to have a shortage on the market.”
Some, however, see no justification for further increases, no matter the trouble, and are confident July will turn the tide in their favour for the first time in 2010.
“Problems are there to be solved, and problems cannot last forever,” one buyer said. “Propylene is available, shutdowns are over. You see the market in Asia and the US getting better. I think it’s going to follow in Europe.”
($1 = €0.83)
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