Perstorp targets €200/t TDI hike in Europe on upstream costs

24 January 2011 18:21  [Source: ICIS news]

By Heidi Finch

LONDON (ICIS)--Perstorp plans to increase toluene di-isocyanate (TDI) contract prices in Europe by €200/tonne ($274/tonne) because of mounting upstream cost pressure, the company said on Monday.

"Prices are being increased to recover lost margins due to sharp increases in raw materials prices over the past four months," Perstorp said in a statement on its website.

A source at the Swedish specialty chemicals company added: "We will be strict on our price increase initiative, given our restricted availability.”

The source was referring to production problems at its Le-Pont-de Claix site in France, which began at the end of December and had also resurfaced during January, although further repairs were expected to take place this week.

The increases would be effective from 1 February or as existing contract terms permit, and would last two months. Prices for exports to the Middle East/Africa regions would go up by a minimum of $200/tonne, Perstorp said.

Other sellers echoed the urgent need to raise prices at the earliest possible opportunity, stating that upstream costs had spiked over recent months, while at the same time TDI prices were falling.

Target increases ranged from €50-150/tonne for February, although a few sellers did not rule out the possibility of minimum rollovers in some cases.

A second TDI supplier said: “The increase momentum is coming, due to [the need for] cost recovery and lowering availability.”

The same source added: “TDI volume is available, but it is drying up,” attributing this to Perstorp’s spate of production problems and Borsodchem’s forthcoming plant turnaround, expected to take place in February.

Strong demand, with customers also placing orders early for February, was another supporting factor for an upward price move, it added.

Buying sources acknowledged that price increases for TDI were logical from an upstream cost perspective, but they were not convinced that market fundamentals would support any possible uptrend in February.

They considered hikes of €200/tonne as unrealistic in one hit, stating that price stabilisation and smaller increases would be more feasible.

One customer acknowleged that: “It is hard to turn from a downtrend to such an upswing. It will take time."

Other reasons to limit price-increase potential included good availability, despite the series of plant outages, said buyers. They also expected that TDI supply would be plentiful this year, especially with new capacity in Europe and Asia, due onstream in mid-2011.

Buyers said that while demand was fairly normal for the time of year, although there was some suggestion that consumption was limited to a certain extent by supply constraints for polyols, the co-product in flexible foam manufacturing.

TDI customers were also mindful that prices for polyols were also likely to go up in February due to the uptrend in feedstock values, which was further supported by balanced-to-tight supply and they needed to weigh this against possible TDI increases.

Another customer stressed that “it would be more and more difficult to pass increases with low [flexible] demand approaching in the Spring/Summer.”

European TDI contract prices in January were assessed between €1,920-1,960/tonne FD (free delivered) NWE (northwest Europe). This reflected a reduction of €30-40/tonne from December.

The price slippage was attributed to good availability and reasonable, but not exceptional, demand. Rollovers were also heard in some cases but not seen to reflect the general trend.

($1 = €0.73)

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By: Heidi Finch
+44 20 8652 3214

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