Europe June MDI contracts steady on balanced supply, recent hikes

15 June 2011 23:59  [Source: ICIS news]

LONDON (ICIS)--European methyl di-p-phenylene isocyanate (MDI) contract prices remain mainly stable in June due to significant hikes earlier in the second quarter and lower benzene feedstock costs being weighed against fairly balanced supply, market players said on Wednesday.

In addition, for crude MDI, a large proportion of contracts are fixed on a quarterly basis, meaning prices roll over into June. General price stability is valid for both pure and crude grades.

Some selective increases of €30-40/tonne ($43-58/tonne) for crude MDI were reported by a few sellers, although this does not reflect the general trend.

The slight upward adjustments were for certain limited accounts, which had not yet been affected by the implementation of the full hike of up to €250/tonne for the secon quarter.

For pure MDI, while most players confirmed stable pricing, one producer said it had mainly achieved increases of €50/tonne, despite the reduction in upstream benzene values, driven by buoyant demand and balanced-to-tight supply.

In terms of actual numbers, there was some market consensus that prices of  €2,000-2,050/tonne FD (free delivered) NWE (northwest Europe) for crude MDI and €2,100-2,250/tonne FD NWE for pure MDI, remain valid for June, unchanged from May, according to ICIS.

There were, however, a few exceptions. One producer said it had rolled over its crude MDI prices into June but is selling around €50/tonne above these levels in northwest Europe. However, this has not been widely confirmed.

In addition, one buying source considers prices up to €2,050/tonne FD as rare, deeming €2.000-2,030/tonne to be most realistic but there is insufficient market confirmation to substantiate this.

Numbers below €2,000/tonne FD NWE were also heard from a few buying sources, but they were seen to reflect discounted rather than gross values or particularly large volumes. This is therefore not representative of the general market level.

Crude MDI demand in northwest Europe remains robust across the downstream construction and automotive sectors. There are, however, a few signs of limited activity in southern Europe, thought to be due to economic constraints in the region. Crude MDI supply is fairly well aligned to demand, but with a possible tightening tendency.

A few sellers suggest that the MDI market could tighten over the next few months, with the prospect of forthcoming plant turnarounds for a few main players, as well as good construction activity.

Buyers, however, say it is too early to tell, stating that any supply constraints are likely to be offset by the expected lull in demand during the summer holidays in Europe.

Pure MDI consumption in the downstream footwear sector remains good for longer than expected, despite low seasonality. Offtake for Coatings Adhesives Sealants Elastomers (CASE) applications is good-to-increasing, in line with peak construction seasonality.

Supply for pure MDI remains balanced-to-tight, as recent production constraints are coupled with good demand. However, some sources suggest that availability for pure MDI has eased from the extreme tightness in the last two months, due to generally improved production in the market.

In manufacturing news, Dow Chemical’s MDI facility at Stade, in Germany is running at reduced rates during some of June due to disruption to its feedstock deliveries, caused by low water levels on the Rhine river.

Borsodchem is building stocks ahead of an extended maintenance turnaround at its MDI M2 unit at Kazincbarcika, in Hungary, which is due to start on 22 July.

The outage is due to last for approximately seven weeks and will include maintenance work, as well as some debottlenecking measures, which are expected to raise nameplate capacity at the MDI M2 unit from 150,000 tonnes/year to 240,000 tonnes/year.

The MDI M1 plant also at the same Hungarian site, which can produce up to 60,000 tonnes/year remains idled. The unit was taken off-line in 2009 for economic reasons.

BASF’s 560,000 tonne/year MDI Antwerp facility in Belgium is due to enter into a turnaround in September, according to a company source, who suggested that the shutdown is likely to last for around four weeks.

($1 = €0.69)

For more on MDI visit ICIS chemical intelligence

By: Heidi Finch
+44 20 8652 3214

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