Europe February MDI largely stable, but with some increases

09 February 2011 23:59  [Source: ICIS news]

LONDON (ICIS)--European methyl di-p-phenylene isocyanate (MDI) prices are largely stable in February, but with some increases, as a number of quarterly accounts and a fairly balanced market were weighed against spiking upstream costs, market players said on Wednesday.

“The benzene (feedstock) pressure is there, but it is a transitional period [in February] as the market is balanced, but it could possibly tighten in March with maintenances and the [expected] pick-up in construction,” said one buying source.

Sellers said they had secured hikes of €20-150/tonne ($27-205/tonne) for MDI in February, stressing the urgent need to recover lost margins given ongoing rocketing benzene feedstock values. However, there was insufficient market confirmation to substantiate any higher prices.

Customers said they had strongly resisted increases in February, citing ample supply and reasonable-but-still-low season demand from the main downstream construction sector. They also said that any attempts at increases in February were thwarted by the proportion of quarterly contract prices, which remained fixed for the remainder of the first quarter.

February contract prices were assessed stable between €1,800-1,950/tonne FD (free delivered) NWE (northwest Europe) for crude MDI and between €1,950-2,025/tonne FD for pure MDI. Some sellers, however, pegged the ranges higher between €1,900-2,000/tonne FD for crude MDI and €2,000-2,100/tonne FD for pure MDI. However, there was insufficient market confirmation to substantiate this.

MDI consumption remained good across most sectors, particularly in the downstream automotive, fibres and footwear outlets. Construction activity was also reasonable-to-better than expected, which was attributed to the relatively mild weather conditions in the January-early February period in 2011 compared with the same time last year.

Supply and demand were fairly well aligned. However, there was some expectation that the market could tighten into the second quarter, with the anticipated seasonal upturn in construction demand, as well as the spate of plant outages over the next few months, sources said.

BASF’s 560,000 tonne/year MDI facility at Antwerp in Belgium was scheduled to enter planned maintenance in March and last for approximately two to three weeks, said a company source.

Also in March, albeit at the end of the month, Huntsman’s smaller 120,000 tonne/year MDI plant at Rozenburg, in the Netherlands, was expected to undergo scheduled maintenance for a few weeks. The larger 280,000 tonne/year MDI facility also at the site was expected to operate normally during this outage period.

Another main MDI facility in northwest Europe was also likely to have a brief maintenance stop in the beginning of the first quarter; however, capacity details were not disclosed.

Looking ahead, sellers were determined to raise MDI prices by at least €250/tonne as soon as possible, given the ongoing need to restore profitability, resulting from spiking feedstock costs.

Some customers said that increases were likely in March or the second quarter, particularly if demand were to seasonally pick-up and supply to tighten, on top of the mounting cost pressure. However, sources were not prepared to commit to precise figures, although they suggested that increases as high as €200-250/tonne were unreasonable and could not be passed on further downstream.

($1 = €0.73)

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By: Heidi Finch
+44 20 8652 3214

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