26 July 2010 14:39 [Source: ICIS news]
By Libby George
LONDON (ICIS news)--European plasticiser buyers hoping for a summer respite to high prices and prevailing market tightness are now bracing for the opposite, market sources said on Monday.
After last week’s force majeure declaration from BASF, market supply is set to contract even further, and all varieties of plasticiser are likely to get more expensive.
“The market is so short that if one supplier is out, the other suppliers cannot replace them,” one plasticiser buyer said. “Some companies will be very much in trouble.”
Dioctyl phthalate (DOP), di-isononyl phthalate (DINP) and other plasticisers are primarily to make polyvinyl chloride (PVC) soft and flexible for end uses ranging from pipes and cables to flooring, medical devices and toys.
This year – marked by low stocks, consolidated DOP production and a series of unplanned production outages – had already been tough for buyers, nearly all of whom have been on allocation for several months.
But after the 21 July BASF force majeure, end-use PVC producers are even more concerned than they were before about getting the plasticisers they need to produce – and passing on enough of the rising costs to maintain a decent margin.
“Every month we are fighting to find material,” said another buyer. “I’ve never faced such a difficult situation in the plasticiser market.”
BASF made the declaration on DINP and three other varieties of plasticisers following an “unforeseeable technical defect” in its iso-nonanol (INA) plant in Ludwigshafen, Germany. The seller said it hoped to have the plant up and running in 14 days.
The outage could hardly come at a worse time for the market. For several months, demand has outstripped supply at such a fast clip that even sellers have expressed frustration with their inability to produce more. Meanwhile, a coming maintenance season – nearly every seller has a turnaround ranging from one to four weeks at some point in the August-October period – has forced them to hold back product from the market.
“A lot of customers could overflow us with inquiries, because in their need, they will take each and every kilo,” said one DOP seller. “I have not a single kilo for another customer.”
It has gotten so bad that some PVC compound sellers have not been able to meet their own commitments, and have sought to purchase either the end product, or feedstock plasticisers, from other sellers. Thus far, none contacted said they could spare either.
Imported material from Asia has served as a respite for some buyers, but it has come at a high price - €1,900-2,000/tonne ($2,451-2,580/tonne) for DINP, according to market sources. But traders said it is small amounts - not much more than 400 tonnes in total - and that a coming maintenance turnaround at a Taiwanese plant will further hinder imports.
Imported material “is definitely not disturbing the market and it is definitely not meeting demand”, one trader said.
While all market players had been hoping for the situation to balance out during the usually quiet summer period, the continual demands, and the BASF troubles, have dashed those hopes.
“It will be even worse than before…I’m afraid that prices will jump further,” one buyer said. “Just after the force majeure coming from BASF, [sellers] started talking about price increases.”
While prices were stable the week ended 23 July, it is likely the calm before the storm. Sellers are discussing hikes of €40-70/tonne for DOP, and potentially twice as much for DINP.
Meanwhile, prices for both products have already skyrocketed since the beginning of the year; both have climbed 66% above the average levels of January to €1,650-1,700/tonne FD (free delivered) NWE (northwest Europe) for DINP and to €1,525-1,575/tonne FD NWE for DOP, according to data from ICIS.
During the same period, PVC prices have risen roughly 15% for both spot and contract, to €810-840/tonne FD NWE for spot, with gross contract prices in the major German market at €1,040-1,070/tonne FD as of 23 July.
Plasticiser sellers, which in addition to BASF include Arkema, ExxonMobile, Oxeno, Oxea and Polynt, are quick to note that market tightness – and not speculation – has dictated increases. Additionally, every supplier has also examined postponing or rescheduling planned turnarounds, but in each case, they determined it was not possible.
“We have announced it since last year,” said one seller that said it found it “virtually impossible” to change its outage. “We cannot delay it or find another date.”
But such assurances are little comfort to buyers, who are bracing for what the prices will be – if they can even get material.
“Unfortunately for us, we are not as good at increasing prices as plasticiser producers,” one buyer said. “We lose margin every month. That’s really the problem.”
($1 = €0.77)
For more on DINP, DOP or PVC visit ICIS chemical intelligence
For more on BASF, Arkema, Oxeno, Oxea and Polynt visit ICIS company intelligence
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