02 November 2011 17:07 [Source: ICIS news]
By Helena Strathearn
Twelve months ago methyl methacrylate (MMA) was hard to source in Europe. Demand was strong and prices were high. Now the market has more material than it can absorb.
Spot prices reached record levels of €2,800/tonne ($3,834/tonne) FD (free delivered) NWE (northwest Europe) in October last year on tight availability and robust demand. But since May this year, spot has come down by more than 30% as the market has become more balanced.
MMA prices are expected to mirror the fall of autumn’s golden leaves over the next few weeks.
Perhaps the most remarkable aspect of the 2010 MMA market is how spot prices more than doubled from April to October on severely limited supply, coupled with strong demand.
Planned, unplanned and prolonged production problems plagued players through the spring and summer of 2010. Imports were restricted because of strong Asian demand. The euro was weak against the dollar and producers were attempting to restore margins to pre-crisis levels.
Jointly, these factors helped push prices up, and for many consumers it was difficult to obtain the quantities they required, no matter the cost.
In May 2010, panic set in. Demand from the coatings and construction industries was soaring. Offtake from the derivative polymethyl methacrylate (PMMA) market for the manufacture of light emitting diode (LED) and liquid crystal display (LCD) flat screen televisions and computer monitors was booming. Asian consumption swallowed vast volumes of the monomer, largely to produce optical grade PMMA to meet robust buying interest for LED and LCD screens.
Producers struggled to feed the market. Demand globally kept material tight.
At their peak in October 2010, spot MMA prices were approximately €770-1,215/tonne above contract values. Spot prices are now €160/tonne below contract. Fourth quarter 2011 contract prices for Europe are €1,910-€2,000/tonne FD NWE, as assessed by ICIS.
“Contract can only provide so much, then I need spot - and that’s expensive,” said a buyer having to use its contract volumes for three weeks, and having to buy spot for one week, each month, in 2010.
Annual global demand was estimated last year at 3-5%, driven by Asia, particularly China where growth was approximately 8-10% a year.
Contract prices rose steadily for two years from the third quarter of 2009, reaching a peak in the third quarter this year.
Contract prices had continued to improve latterly despite better availability, softened demand, a drop in the July feedstock acetone price and lower spot values. Sellers were able to secure increases because the market was balanced to tight.
Decreases came in the fourth quarter as prices settled at €80-130/tonne below third-quarter levels.
The decline comes as little surprise, with deep economic uncertainty and stock market volatility sapping consumer confidence. Buying interest in Europe has faded and has, since spring, been lower than at the same time last year.
There were signs as early as March from a buyer in the coatings sector that the pressure on pricing was severe, and that the market was “starting to look like the first half of 2008”. The buyer added then that demand was “good, but not as good as expected”.
A very gentle slowdown started in May and some end-use stocks began to build up. After 15 months of tightness, supply staggered its way to improvement and there was softer-than-expected demand across all acrylates markets.
But demand is still there. The fourth quarter is typically softer on end-of-year destocking.
Consumers are currently enjoying the swell of local and imported, attractively-priced volumes.
“It’s marvellous. There’s enough,” a relieved MMA buyer said of the ample supply in September. The remarks contrasted sharply with cries in the same period last year that limited availability was “very unpleasant”.
Players in this sector know that if seasonal demand rebounds in the spring, when the construction and coatings sectors start working hard, then supply constraints are likely to exert upward pricing pressure on MMA and PMMA. Autumn marks the transition from summer into winter.
But, with forecasts blurred by macroeconomic events, buyers cannot take full advantage of offers because stocks are being carefully managed and sales are now only being secured as and when demand is certain.
“What we want is stability,” a buyer said. “What if demand comes back? Then there will be pricing pressure again, and that’s a concern.”
The buyer added that it is difficult to pass increases on further down the chain.
Demand for MMA is now around 15-20% lower than at the same time last year when offtake was exceptionally high. End of year destocking is taking place earlier.
“We don’t want to have high-valued stocks if demand drops further,” a buyer from the coatings industry said.
Another buyer added: “We didn’t see MMA demand go down in 2010 in the fourth quarter, it was unusually high. I think Q1 will be better than the fourth quarter. It always is.”
MMA prices in Asia have dropped by about 16% from highs in July because of reduced offtake. Product is being stockpiled as a result.
“The demand in Q4 is much lower. October this year has already been 10% lower compared with October 2010. As for November and December, who knows?” another buyer said.
“Regarding Q1, the opinion is not brilliant. Volumes won’t be increasing much. If no stability comes from the financial industry, and if the banks don’t lend the money, then the people can’t spend.”
There is talk this week of spot valued as low as €1,650/tonne FD NWE. May’s spot values were €2,500-2,735/tonne FD NWE. “Lower spot prices might drive monthly prices down,” a seller said when considering expectations for the months leading up to the second quarter of 2012.
“PMMA demand now is about 10% down on last year’s very healthy levels, and lower than it was in the first half of this year,” a PMMA producer said.
“Q1 demand will pick up again. The forecast is good. It’s just the end of the year - uncertainty dominates,” the producer added that it expects pricing to stabilise.
“Demand next year will be at least the same as this year, and with potential growth. After the destocking, you need to build stocks. I mean, you cannot live without stocks.”
($1 = €0.73)For more on MMA visit ICIS chemical intelligence
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