OUTLOOK ’11: Asia MMA, PMMA prices to rise on strong demand

04 January 2011 04:04  [Source: ICIS news]

By Junie Lin

MMA goes into production of optical grade polymethyl methacrylate (PMMA), which is used in making flat-screen TVs SINGAPORE (ICIS)--Asian methyl methacrylate (MMA) and polymethyl methacrylate (PMMA) prices are expected to remain firm this year on the back of growing demand from downstream sectors, according to industry sources.

MMA is the key raw material used in the production of PMMA polymer, cast sheets and acrylic resins for coatings and emulsions.

A large portion of the current MMA supply also goes into production of optical-grade PMMA, which has applications in the flat-screen televisions with liquid crystal displays (LCD), light emitting diode (LED) or plasma screen technologies.

These new applications have caused demand for MMA and PMMA to surge, particularly in China, which has a growing middle-class population.

The ability of Chinese consumers to buy high quality and bigger electronics items would be an important growth engine for demand for PMMA, particularly optical grade, throughout 2011, market sources said.

An industry source estimated that China's TV market would continue to grow at an annual rate of 5.0-6.7% over the next four years.

Optical-grade PMMA prices were at around $3,000-3,180/tonne (€2,250-2,385/tonne) CFR (cost & freight) China in the week ending 24 December 2010. The product’s values reached a peak of $3,200/tonne CFR China in the third quarter of last year.

General Purpose (GP) grade PMMA - used in extrusion sheets and household products, including photo frames, souvenirs, reading glasses and sunglasses - prices were hovering at $2,950-3,100/tonne CFR China in the week ending 24 December 2010, compared to $1,910-1,960/tonne CFR China in the same period a year earlier, ICIS data showed.

Asian MMA prices in the week ending 24 December 2010 were assessed at $2,350-2,400/tonne CFR southeast (SE) Asia for cargoes of more than 500 tonnes, compared to $1,730-1,743/tonne in the same period a year ago, according to ICIS data.

However, the prices of optical-grade PMMA, GP-grade PMMA and feedstock MMA had remained stagnant since hitting their current high levels in the third quarter of 2010, as most television manufacturers were holding high inventories of light-guided panels for LED TVs, according to industry sources.

Furthermore, the MMA and PMMA sectors in China were currently experiencing a seasonal lull in the run up to the Chinese Lunar New Year holidays, which fall on 2-8 February 2011.

As a result, producers could not increase their prices further despite the hike in other raw materials costs such as acetone and methanol, market sources said.

Despite the high ­inventory situation among TV ­manufacturers, optical-grade PMMA consumption is considered by many market participants, buyers and sellers, to be on the growth path for the long term.

The continued demand for optical-grade PMMA, largely from the electronics sector, has prompted a string of expansions that are scheduled to come on stream this year.

Taiwan-based Chi Mei is planning to expand the capacity of its China and Taiwan-based PMMA plants in the second half of 2011.

Chi Mei would reportedly add 70,000-80,000 tonnes/year of PMMA capacity to its unit at Zhenjiang in China’s Jiangsu province. The plant currently has a nameplate capacity of 50,000 tonnes/year.

Chi Mei would also increase the capacity of its 175,000 tonne/year PMMA facility in Tainan City, Taiwan, by an additional 70,000-80,000 tonnes/year in the third quarter of this year.

South Korean producer LG MMA is planning to increase its production capacity for PMMA by 20,000 tonnes/year to 110,000 tonnes/year through debottlenecking. The expansion is expected to be completed by the second quarter of this year.

Japanese producer Mitsubishi Rayon Co (MRC) is planning to raise the capacity of its 40,000 tonne/year PMMA plant in Nantong, China, by a further 10,000-15,000 tonnes/year in the third quarter of this year.

Daesan MMA is planning to debottleneck its 40,000 tonne/year PMMA line at Daesan, South Korea. The move is expected to increase the company's PMMA production capacity by 10,000 tonnes/year.

Evonik Industries and AU Optronics have plans to boost the production capacity at their PMMA joint venture, Evonik Forhouse Optical Polymers, at Taichung in Taiwan to 85,000 tonnes/year.

In comparison, only a couple of MMA expansions would be brought on stream this year.

Asahi Kasei and PTT Group’s 70,000 tonne/year joint venture unit at Mab Ta Phut, Thailand, is scheduled to start up in the second quarter of the year, while Daesan MMA has plans to increase its plant's capacity by 15,000 tonnes/year to 105,000 tonnes/year.

The flood of capacity expansions has prompted market players to question whether there would be sufficient MMA to meet the needs of the PMMA sector, especially since most Asian MMA producers had already restricted supply to their customers in 2010 and had very little extra material to offer.

“It would be silly to run all extra capacity at 100% and oversupply the market. It would surely dampen prices [of PMMA] if demand did not turn out as well as expected,” said an Asian trader.

A major Japanese MMA supplier told ICIS the additional MMA supply would not be enough to support the extra PMMA capacity, as there would also be more demand for the product from the cast sheet and emulsions industries.

With Asia’s demand for paint expected to grow at an annual rate of 7.9% up to 2014 as a result of the region’s expanding economies, demand for MMA is expected to rise at the same rate.

The improved demand and resultant tight MMA supply in 2011 means MMA contract terms would have to become stricter, according to several producers in Asia.

For example, several MMA majors had proposed to reduce the discounts offered to contract customers this year, which typically range from 5-6% or up to 8% and are usually included in yearly contracts based on a spot price-linked formula basis. This percentage could be slashed by more than 50% to just 1-3% or nothing at all.

Sellers were still negotiating for higher base prices and lower discounts, and many have had to carry negotiations over from 2010, market sources said.

Nonetheless, most market sources anticipated that end-user sales would pick up during the Chinese festive period and that could bode well for the MMA and PMMA sectors, as holiday sales are used as a baseline for projections for the rest of 2011.

($1 = €0.75)

For more on methyl methacrylate and polymethyl methacrylate, visit ICIS chemical intelligence
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Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Junie Lin

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