Europe Aug flexible polyols prices stable to softer on market, costs

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

LONDON (ICIS)--European standard flexible polyol contract prices are stable-to-softer in August, as fairly balanced supply and bi-monthly agreements are weighed against feedstock pressure and low demand, market players said on Wednesday.

Bi-monthly agreements for July-August have been put in place in some cases to cover the summer holiday period, meaning prices have rolled over into August. However, for some there was a re-negotiation and some downward price adjustment in view of lower feedstock costs and subdued demand. Price reductions were pegged on average between €20-30/tonne ($29-43/tonne) in August.

Standard European flexible polyol prices are frequently reported between €1,800-1,870/tonne FD (free delivered) NWE (northwest Europe), depending on volume size. This represents a rollover for low-end business and a reduction of €30/tonne at the upper part of the range.

A few suppliers, however, peg their prices slightly higher than reflected in the published range. One producer considers standard flexible polyol prices of €1,850-1,875/tonne FD more realistic in August. Although a second seller said it has concluded business around €1,880/tonne FD on average in August. However, these higher levels are not widely confirmed in the market.

By contrast, prices below €1,800/tonne FD are heard in a few cases, but there is insufficient market confirmation to substantiate this as a general market level.

European flexible polyols demand is lacklustre in August due to a combination of low seasonality, with some concerns about underlying demand because of general economic uncertainty. Supply for flexible polyols remains fairly balanced, although some slight length is noted from buyers.

Despite limited downstream market activity, supply is being largely balanced by production adjustments in favour or better performing rigid grades, output cutbacks and some favourable export opportunities to the Middle East and Africa (MEAF) compared to its flexible counterpart, toluene di-isocyanate (TDI), on the back of less Asian competition.

For rigid and speciality polyols, prices are largely steady in August, supported by fairly balanced market conditions and longer term contracts, particularly for rigid polyols. As a result, rigid polyol prices remain unchanged in the range €1,950-2,000/tonne FD NWE. Price reductions for certain specialities are heard in a few selective cases, but they do not reflect the general market direction.

Looking to September, sellers are aiming to at least stabilise, if not raise polyol prices, particularly for standard flexible grades, if demand picks up. They said that the upward price initiative is necessary in view of two months’ of polyols price erosion and the need to recoup feedstock increases from earlier in the year.

Buyers, however, are determined to resist any price increases for polyols amid concerns about downstream demand. They also point to recent falls in upstream crude values, which could indicate further direction for propylene feedstock in September, although it is still too early to have a clear view. Buyers also stress that they still need to pass on feedstock increases from earlier in the year and are in no position to take on further price rises, particularly in view of the unfavourable economic conditions.

($1 = €0.70)

By: Heidi Finch
+44 20 8652 3214

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