08 September 2010 16:54 [Source: ICIS news]
LONDON (ICIS)--European polycarbonate (PC) operating rates have fallen to as low as 50% due to difficulties in sourcing raw materials, producers said on Wednesday.
“We have some problems on supply. Phenol is tight. PC producers are operating at 50%, and a lot of that’s being exported to Asia because of higher prices,” a producer said.
Not all producers were in agreement, with some placing operating rates at 80%, although they said that they had been receiving more enquiries and that this could be explained by production problems at other manufacturers.
Low operating rates coupled with strong demand have caused tight supply in the European PC market and lead times are at up to 18 weeks from some producers as a result, buyers and sellers confirmed.
“For the fourth quarter, the [PC] market is still tight. We’re struggling with lead times of 16-18 weeks,” a producer said.
PC lead times have been increasing throughout the year. In June lead times were reported at up to 16 weeks. At the start of 2010, lead times were at four to six weeks.
High consumption was reported across the downstream industries, but buying interest was particularly strong in the automotive sector.
“August was quieter, but September [demand] is back on track – it’s higher than scheduled,” a buyer said. “We think it’s underlying demand, not restocking.”
Automotive demand was being driven by exports to Asia, where material was tight, demand strong and prices high. European players were preferring to ship to Asia, some sources said, due to higher profitability, with margins estimated at €0.30-0.40/kg above European levels. Most sources were expecting Asian demand to continue throughout the fourth quarter.
“[Shipping to Asia producers gets] higher prices. It’s more money and its in cash, so you don’t have to wait 60 days for repayment. So naturally suppliers want to sell there,” a producer said.
Asian automotive demand was also fuelling European consumption, as car manufacturers were building in Europe and exporting to Asia, sources said. Some German players estimated a year-on-year growth in exports from Germany to Asia of around 70%.
Companies that had not renewed leased cars in 2008 and 2009 due to the global economic recession were re-entering the market, causing more domestic purchases of larger vehicles, further supporting strong automotive demand.
The European bisphenol A (BPA) sector, the feedstock for PC, has seen a gradual improvement of upstream phenol availability since early June. Nevertheless, some sources said that the market remained tight, despite the relief that came with renewed supply of the raw material. Industry-wide, sources agreed that demand was still very strong and a handful of trading and buying sources said that consumption continued to exceed availability.
($1 = €0.79)
Additional reporting by Helena Strathearn
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