Europe crude MDI prices stable in August on balanced market

10 August 2011 23:59  [Source: ICIS news]

LONDON (ICIS)--European crude methyl di-p-phenylene isocyanate (MDI) contract prices remain mainly stable in August, despite a significant hike in upstream benzene costs, due to a large number of longer-term contracts and a fairly balanced market, market players said on Wednesday.

Crude MDI prices for August are largely confirmed within the existing range of €2,000-2,050/tonne ($2,857-2,929/tonne) FD (free delivered) NWE (northwest Europe), unchanged from July, according to ICIS.

One producer pegged its range €50/tonne higher than the published range, but there is insufficient market confirmation to substantiate these levels.

By contrast, minor price reductions for crude MDI were heard in August from a few buyers on the back of plentiful supply. However, this price movement does not reflect the general direction in the market in August. Crude MDI numbers below the range are also heard in a few cases, but they are seen to be discounted rather than gross price levels.

A number of MDI contracts are traditionally fixed for the third quarter, which means that these prices will roll over until at least October. Any monthly crude MDI business is limited and is expected to follow a similar stable pricing trend in August, as players are not available to re-negotiate prices due to the summer holidays. As a result, some bi-monthly agreements have been put in place for July-August to cover the summer holiday period. 

MDI consumption is seasonally slower during the summer holidays, but this is seen to be offset slightly by stock-building ahead of an MDI maintenance schedule in the Autumn, as well as the expected uptake in demand in September, pending economic developments.

For pure MDI, prices are pegged stable-to-softer, depending on source. Despite this, prices are frequently reported between €2,050-2,150/tonne FD NWE for August, which represents a reduction of €50/tonne from the previous month. The range has been changed accordingly. Rollovers were also heard, but largely incorporated within the price range. By contrast, one producer contests any price erosion and pegged contracts slightly higher, reporting business at up to €2,250/tonne FD NWE.

When MDI settlements for August were agreed, pure MDI supply had improved from the tightness seen a few months ago and had moved balanced-to-slightly long, due to the general seasonal slowdown, with particular weakness noted in the downstream footwear sector. The stock position for one MDI producer, however, has since changed to short, following a combination of planned and unplanned stops.

Looking ahead, MDI suppliers are determined to increase prices after the summer holidays in September/October, depending on contract type, in order to recoup lost margins in view of the significant hike in upstream benzene costs. Precise targets are not yet disclosed because of the upstream price volatility. Sellers also expect supply to tighten in September/October due to a series of plant turnarounds for main players, coinciding with an expected uptake in demand.

However, buyers are not convinced about possible price increases in the next few months, even if demand picks up, stating that the forthcoming turnarounds are planned and stocks are already built in advance. They also speculate that the additional MDI capacity coming on-stream from one producer is also likely to mitigate any possible supply constraints and thwart a possible upward price move.

In manufacturing news, one MDI facility in southern Europe is expected to resume operations on 10 August following an unexpected shutdown, which took place in the second half of July for technical reasons. The source said it has been working from stocks at the site and from its other European facility, although inventories are now low and the re-start is critical.

The same company’s two out of three distillation units in northwest Europe are down for planned and unplanned reasons. The largest of the three facilities is offline for planned maintenance until 20 August, however, another unit went down unexpectedly over the weekend ended 6-7 August because of technical issues. The dowtime for this unit is expected to take at least two weeks.

Planned maintenance is thought to be ongoing at Borsodchem’s MDI M2 facility at Kazincbarcika, Hungary. The company had previously said that the unit would be taken down in the second half of July for an extended seven week outage period. During this time, the unit would undergo a combination of planned maintenance, as well as debottlenecking measures. The latter would raise the nameplate capacity from 150,000 tonnes/year to 240,000 tonnes/year.

Germany-based BASF’s 560,000 tonne/year MDI plant at Antwerp, Belgium, is also expected to undergo an extended maintenance period of around six weeks from September.

In October, US-based Huntsman’s 120,000 tonne/year unit at Rozenburg, the Netherlands, is due to shut down for planned maintenance for around three weeks.

($1 = €0.70)

By: Heidi Finch
+44 20 8652 3214

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