25 August 2011 04:53 [Source: ICIS news]
By Junie Lin and Monica Cai
SINGAPORE (ICIS)--Chinese domestic methyl methacrylate (MMA) prices are set to remain soft and may see another round of decline in the coming months amid fizzling demand from downstream end-user industries, market players said on Thursday.
Chinese domestic MMA prices have been on a steady decline since early May.
Prices in east China have fallen by more than yuan (CNY) 2,000/tonne ($313/tonne) over the last three months. They are at CNY17,700-18,400/tonne EXWH (ex-warehouse) on 25 August compared with CNY20,000-20,500/tonne EXWH in early May.
Prices in south China, meanwhile, have fallen by up to CNY2,400/tonne during the same period. They are at CNY18,400-19,300/tonne DEL (delivered) on 25 August compared with CNY20,800-21,200/tonne DEL in early May.
The fall in prices is caused by a combination of factors.
China’s credit crunch and measures to cool the property market have affected demand for emulsions used in the construction industry.
However, the main driver for the price downtrend is the poor downstream conditions seen in the polymethyl MMA (PMMA) polymer and cast sheets segments.
MMA is used to produce PMMA polymer, cast sheets and acrylic resins for coatings and emulsions.
Domestic supply is expected to rise as a 93,000 tonne/year MMA unit at Shanghai Chemical Industrial Park in Caojing was restarted earlier than expected on 23 August, market players said.
Many market players noted that the shutdown did not tighten supply and stop prices from falling, and they see very little reason to stock up on cargoes now.
Most end-users are buying on a need-to basis, said traders.
There is an influx of imports to China from other regions such as southeast Asia that are experiencing poor demand, market players said.
A more unusual situation is that exports from South Korea were heard recently, market players said.
South Korea is usually a net importer of MMA.
Japan’s MMA inventories are edging up and two Japanese producers are turning to China as an export destination to relieve their inventory pressure.
“It’s [the imports to China] going to flood the market with supply and this is going to depress prices even further,” a Chinese domestic producer said.
Japan inventories are estimated to be at close to or more than 30,000 tonnes in August, said producers.
This is almost 10,000 tonnes more than “typical levels”, producers said.
Japan’s MMA inventories were 26,235 tonnes in June, 75% higher year on year, according to data from Japan Petrochemical Industry Association (JPCA).
“I am assuming there is lots of MMA lying around in regional Asia and they are dumping material here [China]," a downstream end-user said.
The end-user had received a few offers at below $2,300/tonne (€1,587/tonne) for 1,000 tonnes of MMA for loading in August, but refrained from buying.
"The price sounds too good to be true, but I am not interested now,” the end-user added.
Market players across the MMA product chain cited concerns about a possible slackening of global demand, with an economic recession threatening the US.
In addition, troubles in western economies will hinder the growth of economies in Asia, they added.
The recent economic data from the US offers little comfort to investors, as they seem to hold the view that the world’s biggest economy is teetering towards another recession, said market players.
The downstream MMA industries such as construction and automotives are heavily linked to GDP, which means their growth rates are usually in line with the country’s growth.
Chinese MMA market players expect next month’s demand requirements to set the tone for the rest of the year because September is the traditional peak period for demand.
The underlying demand is difficult to predict, added producers and traders, given that PMMA major, Chi Mei, had reportedly postponed the start-up date of its expansion plans.
The company had originally scheduled to start up its new 40,000 tonne/year PMMA line at Zhenjiang in China's Jiangsu province in the second half of this year.
However, Chi Mei has postponed this to the first quarter of 2012 because of poor demand for the material.
“If you ask me two months ago, I am confident about the MMA price outlook [for September]. But I can’t say for sure now,” a China-based producer said.
($1 = CNY6.39, $1 = €0.69)
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