Europe July MDI contracts firm as demand outweighs supply

07 July 2010 23:59  [Source: ICIS news]

LONDON (ICIS news)--European methyl di-p-phenylene isocyanate (MDI) contract prices increased in July due to ongoing short supply, buoyant demand and margin recovery, market players said on Wednesday.

A manufacturer said: “The July benzene reduction does help, but we are still below re-investment level and we need to do some catching up. We need solid re-investment economics, independent of benzene fluctuations,”

A second producer said: “Demand is extremely and unexpectedly strong and it is a tight supply situation for all products, for systems and basic products.”

A third seller said: “Everybody wants every last amount [of MDI], its more than we can supply.”

Customers also confirmed healthy market fundamentals, with one stating: “The [price] increases are due to the short supply situation and demand is good.”

Offtake for crude MDI remained unexpectedly healthy into July, with no signs of any real summer slowdown in the downstream construction and automotive industries, sources said.

This was conciding with production problems such as Borsodchem’s force majeure on MDI and upstream aniline feedstock constraints, which continued to limit MDI output.

For crude MDI, producers said they had passed on increases of €100-150/tonne ($127-190/tonne) for their crude monthly business in July, which represented the greater proportion of accounts.

For previous quarterly accounts, they had secured larger hikes of €200-250/tonne. One manufacturer, however, said it had also passed on this larger level hike for its monthly business.

Customers mainly confirmed increases of €50-100/tonne for July. For quarterly accounts, larger hikes of  €50-200/tonne were reported, although sellers reported minimum increases of €200/tonne.

There was also some variation about actual price levels. Sellers reported prices between €1,750-1,850/tonne FD (free delivered), but buyers quoted prices either side of €1,700/tonne and questioned prices up to €1,800/tonne, apart from in the Mediterranean.

In order to reflect some middle ground, the European crude MDI contract price range was assessed between in July €1,700-1,770/tonne FD NWE (northwest Europe) according to ICIS. This reflected an increase of €50-70/tonne from June.

Numbers either side of the range were also heard, but they were not widely confirmed.

For pure MDI, reported increases ranged between €75-200/tonne for July and in some cases August as well, but with most agreement at plus €100/tonne. As a result, the range was moved up to €1,850-1,900/tonne in July.

Prices below €1,800/tonne FD were heard from one customer, but it was not seen to reflect the general market.

By contrast, higher numbers were also heard on the sell-side, but there was insufficient market confirmation to substantiate this.

Similar to its crude counterpart, the uptrend in pricing was also fuelled by short supply, exacerbated by production issues and good-to-strong demand, depending on sector.

($1 = €0.79)

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By: Heidi Finch
+44 20 8652 3214

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