FocusEurope December MDI prices largely lower despite some rollovers

07 December 2011 23:59  [Source: ICIS news]

LONDON (ICIS)--European methyl di-p-phenylene isocyanate (MDI) prices for December monthly business are largely lower despite some having rolled over, market sources said on Wednesday.

Suppliers said they had rolled over prices, in spite of the seasonal slowdown, because of the slightly firmer trend in the upstream market and the underlying need to restore margins following recent price erosion.

Despite this, some acknowledged that prices, particularly for average volume customers, were slightly lower than in the existing range from November.

Buyers largely reported reductions of €20-50/tonne ($27-67/tonne) for their December monthly MDI business in northwest Europe. They said the downward pressure was linked to low demand and the fact that sellers needed to shift volumes.

Larger price drops of €100/tonne were also heard from a few buyers in northwest Europe and the Mediterranean, but there was insufficient market confirmation to substantiate this. By contrast, one or two monthly crude MDI buyers said they had agreed to roll over pricing in December.

On top of this, a proportion of crude MDI contracts were fixed for the quarter, which meant that prices would largely roll over until the end of the fourth quarter. However, they were not seen to reflect the current market as these contracts were agreed back at the end of the third quarter.

In terms of actual numbers, some buying and selling sources considered monthly crude MDI prices in the mid-€1,800s/tonne to mid-€1,900s/tonne FD (free delivered) NWE (northwest Europe) to be most realistic in December.

The crude MDI range was changed to €1,850-1,950/tonne FD NWE, according to ICIS. This represented a reduction of €20-30/tonne from the previous month.

Numbers below the range were also heard in a few cases but they were not widely confirmed. One manufacturer pegged the range slightly higher between €1,900-1,970/tonne FD, stating that it had not accepted price reductions in either November or December.

For pure MDI, prices are holding relatively steady in December, because of a firm producer stance and the hope of a seasonal uptick, which is expected to materialise over the next few months. One producer, however, conceded that there was some slight softening at the upper-end of the range.

Pure MDI prices remain largely in the €1,900s/tonne and up to €2,000/tonne FD, according to ICIS. This represents a rollover for low-end business and a reduction of €25/tonne at the upper end of the range.

Prices for pure MDI in excess of €2,000/tonne FD were heard by a few sellers, but there was insufficient market confirmation to susbtantiate this. Numbers below the range were also heard from one buyer, but this was not widely confirmed.

Demand in December is seasonally lower in the main downstream construction sector. Buyers, however, said that demand is also depressed because of underlying concerns about the general economy.

Sellers maintain that demand in November has held up reasonably well due to relatively mild weather conditions and although they expect a slowdown in December, because of the shorter working month, they said this is being sufficiently managed. Despite this, buyers maintain that supply for MDI is plentiful because of lower downstream demand.

Looking to January, Huntsman has recently announced plans to increase prices for all MDI products by €100/tonne as of 1 January to address inflationary pressures and to achieve long term reinvestment.

Other MDI suppliers said they would also look to increase prices by a similar amount in either January or February to recover lost margins. One supplier said that profitability is low and it would cut back production further and be prepared to lose volumes if price increases were not achieved

Buyers, however, said they would strongly resist any price increases in January, in view of the fragile economic climate and the lack of investment in new downstream building projects, along with the fact that the first quarter is traditionally a slow period in the construction sector because of generally unfavourable weather conditions.

($1 = €0.75)

By: Heidi Finch
+44 20 8652 3214

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