INSIGHT: Uneasy outlook for acrylate esters buyers in Europe

15 November 2010 17:36  [Source: ICIS news]

By Libby George

LONDON (ICIS)--Changes are afoot in the European acrylate esters world, and buyers are worried that the coming year will look much like 2010: full of bad news.

Acrylic acid, for which demand is strong, is used in the manufacture of superabsorbent polymers and to make acrylate esters - including butyl acrylate, ethyl acrylate, methyl acrylate and 2-ethhexyl acrylate. The acrylate esters find wide use in end products ranging from surface coatings, adhesives and sealants to plastic additives and textiles.

Over the past year, acrylate esters prices have steadily increased, driven by high demand and unrelenting, unplanned outages in both Europe and the US.

Buyers had anticipated a dip in prices, however minor, since August, when demand usually slows down, and started November freely negotiated contract discussions with even more optimism.

Now, however, there comes an entirely different message from the market: less product available, fewer suppliers and more of the same prices in 2011.

“There’s a change coming. There’s a different mindset,” one seller said. “Contracts from this year to next are going to look different.”

Both buy and sell sides have already said they expect the merchant market to remain precariously balanced next year.

Now, many are saying that producers will have even less on the market as demand from their integrated products, including superabsorbent polymers, dispersions and water treatment, is expected to remain strong - and even to grow.

The buyers who can are beefing up their planned spending on raw materials for 2011. But those who cannot are worried about how non-integrated users will fare in the new environment.

"The top priority for [sellers] is the captive use. This is clear,” one trader said. “Already, Dow has told some customers that they will not be able to supply them in 2011 because they cannot confirm the volume.”

Dow and some other European suppliers confirmed that they will have to turn away some customers looking to secure 2011 demand, both due to the high level of requests and to internal needs.

Captive use - much of it from the booming superabsorbent polymers, which go into nappies and adult diapers - is high and increasing, as is demand from the merchant market. Other suppliers to the European market include BASF, Hexion, Arkema and Sasol.

“What we are saying is that we are committing to the volumes we are sure we can provide,” a Dow source said. “Maybe customers are scared because they saw what happened in 2010 and they want to make sure all their volumes are committed.”

However, some buyers and resellers worry that recent market consolidation - such as BASF’s purchase of Ciba in 2009 and Cognis in 2010; Dow’s merger with Rohn & Haas in 2009; and even smaller player Hexion’s purchase of Rhodia’s latex business in 2006 - has shrunk the amount of material that sellers will offer on the merchant market.

Not all sellers expect an increase in captive use, and those that do would not outline by how much it would grow. The concern, however, was not one they would dismiss, either.

“We have a natural consumption increase,” a third seller said. “We are going to disappoint a lot of customers…I could sell my plant two or three times over.”

Nearly all sources in Europe do not see the market lengthening significantly until new capacity comes on stream.

However, the only new plant currently scheduled anywhere near Europe is the 400,000 tonne/year Dow-Tasnee joint venture acrylic acid project at Jubail, Saudi Arabia, planned to open in 2014 - far away from offering any immediate relief. 

Additionally, many industry observers question how much of that plant's output will be available for outside buyers. The company is simultaneously constructing superabsorbent polymer plants that will eat up much of the acrylic acid, leaving little to produce the downstream acrylate esters.

Additionally, sellers have made it clear that they expect contract prices, which have increased 78% since the beginning of the year, to an average €2,090/tonne ($2,863/tonne) FD (free delivered) NWE (northwest Europe) for butyl acrylate in October, to stay at or near where they are now in order to ensure they can perform needed maintenance on plants which are currently running, without even thinking about new capacity.

“We have experienced this shortage…because the past margins were not high enough for investments,” another seller said. “There was a long period [when] the market was filled with low prices, which did not allow the market to invest in their plants. You do not recover from that in six months or two quarters.”

Some buyers are actively looking for substitute products. But the high prices of earlier in the year illustrated how difficult this can be. Others have speculated that it is “a bit of a worry” that some could be driven off the market altogether.

“The point there is very clear: they only want customers who can pay their high prices,” one buyer said. “Eventually, only these customers will remain.”

($1 = €0.73)

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By: Libby George
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