Europe Feb MDI contract prices firm on costs, despite low season

08 February 2012 23:59  [Source: ICIS news]

LONDON (ICIS)--European methyl di-p-phenylene isocyanate (MDI) monthly contract prices have firmed in February, despite some buyer resistance, on higher costs and the need to recoup margin losses, market players said on Wednesday.

For crude MDI, sellers reported increases of €50-150/tonne ($67-200/tonne) for monthly business, although two of the suppliers, who said they held firm on price hikes of €100-150/tonne in February, conceded that they had lost some business as a result.

There had been strong buyer resistance to price increases for MDI in February on the back of low season in the main downstream construction sector and sufficient supply.

Nevertheless, buying sources in northwest Europe confirmed increases of €50-90/tonne for monthly business in February based on higher costs. The larger hike was confirmed by a customer, whose prices are below the published price range.

By contrast, one customer in the Mediterranean said it had secured a rollover in its crude MDI price, stating that particularly subdued demand in southern Europe, which has been most affected by macroeconomic concerns as well as low seasonality, could not support any price increases for MDI. However, this was not confirmed by sellers.

Monthly crude MDI prices were largely between €1,900-2,000/tonne FD (free delivered) NWE (northwest Europe) for February, an increase of €50/tonne from January.

On top of monthly crude MDI business, there were already quarterly accounts in place which had been agreed back in December. As it is mid-quarter, prices for these accounts rolled over into February. Quarterly prices are generally set at €1,800-1,850/tonne and below, but they are not seen to reflect the general monthly price level in February.

Players, however, expect that price increases will be inevitable for quarterly accounts as of April, based on recent mounting cost pressure the expected seasonal uptick in the downstream construction sector along with the MDI maintenance schedule.

Crude MDI consumption into the downstream building sector held up well in January because of mild weather conditions, although players are mindful that the harsh winter conditions which have spread across Europe over the last week could impact MDI demand during February.

Sources said it is still too early to have a clear view on this, stating that any effects on MDI demand will depend on how long the cold snap lasts. Some players said that demand remains fairly similar to the level seen in January, with some pre-buying activity in anticipation of further price hikes countering any possible weather-related effects.

By contrast, one customer said that a few orders are already being pushed back in central Europe, because the region has been particularly affected by the strong winter weather.

The crude MDI market is fairly balanced, although a few producers suggest that there is a tightening tendency because of reasonable European demand and improving export opportunities. 

For pure MDI, while price increases are reported between €50-150/tonne in February there is some variation in actual numbers, with prices mainly between €1,950-2,050/tonne FD NWE, which represents increases of €25-50/tonne from January, according to ICIS. 

There was also talk of higher numbers up to €2,100/tonne for pure MDI on the producer side, but this was not confirmed in the market.

Pure MDI demand is seasonally healthy in the downstream footwear sector and supply is limited because of recent MDI production cuts during low season for crude MDI, which has most impacted pure MDI because of its low yield and limited shelf life.

In production news, Dow Chemical is preparing for its MDI turnaround, which is due to start in April at its Stade facility in Germany for approximately six weeks.

Huntsman’s MDI operations at Rozenburg, in the Netherlands are due to undergo planned maintenance during April for around three weeks, with a staggered approach for the two units.

($ = €0.75)

By: Heidi Finch
+44 20 8652 3214

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