FocusAsia MMA may rise on high naphtha costs, US buyers' presence

05 March 2012 07:15  [Source: ICIS news]

By Junie Lin

BRISBANE (ICIS)--Methyl methacrylate (MMA) prices in Asia may continue to increase on the back of higher cost of feedstock naphtha, and with US buyers trying to compete for supply in the region, market sources said on Monday.

Asian MMA producers are aiming for a $50-100/tonne (€38-76/tonne) increase in March prices from February to protect their margins, given high spot values of feedstock naphtha.

Naphtha soared to a 46-month high late last week, with a sale tender from India fetching a record premium of $50/tonne because of tight regional supply.

MMA prices for cargoes of 20-300 tonnes stood at $2,020-2,150/tonne CFR (cost and freight) SE (southeast) Asia in the week ended 2 March, up $50-70/tonne from a month ago, ICIS data showed.

Opportunity for arbitrage trades to the US has recently opened up, adding to the upward pressure on Asian MMA prices, market sources said.

Asian sellers have received late last week strong buying enquiries from US MMA producers, which are hard-pressed to make good on their domestic contractual commitments as their own output is being limited by a shortage of feedstock and high cost of production, they said.

Two US-based producers are currently seeking 5,000 tonnes each of MMA cargoes from Asia, for shipment in March and April, market sources said.

The arbitrage window between the US and Asia is usually closed, with producers catering to their respective domestic markets. But given the present circumstances, it is more cost-effective for US-based MMA producers to procure cargoes from Asia, where prices are comparatively lower, market sources said.

Asia bulk prices are likely to be cheaper by $145-315/tonne than US prices, at $2,280-2,330/tonne CFR US, inclusive of an estimated $150/tonne shipping cost to the US, market sources said.

In the week ended 2 March, February US MMA prices FD (freely delivered) rail-car at $2,425.08-2,645.54/tonne, while Asian cargoes of more than 500 tonnes were at $2,130-2,180/tonne CFR SE Asian, according to ICIS.

“The bulk US buyer may be willing to pay a premium over the current spot prices in order to secure cargoes,” said a northeast Asian trader.

Some major traders in Asia are considering making offers to US buyers because of the expected premium, market sources said.

But so far, most major Asian producers had to reject the buying enquiries from the US. MMA stocks are currently low because of ongoing and upcoming turnarounds at regional facilities.

“We were asked to sell 3,000 tonnes of MMA but we rejected it as we are low on stocks,” said a source from Asahi Kasei of Japan.

Asahi Kasei’s 100,000 tonne/year MMA plant in Kawasaki is currently shut and will only restart on 13 March.

Mitsubishi Rayon’s 50,000 tonne/year No 2 line in Otake, Japan, and Formosa Plastics Corp’s (FPC) acetone cyanohydrin-based 98,000 tonne/year MMA unit in Mailiao, Taiwan, are also down for maintenance.

Daesan MMA’s 90,000 tonne/year MMA plant in South Korea is due for turnaround in end-March, while Huizhou MMA in China will conduct a two-week turnaround at its 90,000 tonne/year unit at Guangdong in May.

In Asia, MMA buyers, especially from the castsheet and emulsions segments, are being forced to stock up on cargoes at high prices in anticipation of tightening supply, even though demand from derivative sector is flat, market sources said.

Polymethyl methacrylate (PMMA) is the other major application, and PMMA plants in Asia are usually vertically integrated with MMA plants.

PMMA is a transparent thermoplastic, often used as a light or shatter-resistant alternative to glass, with downstream application in televisions with light crystal display (LCD) or light emitting diode (LED) screens.

($1 = €0.76)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Junie Lin

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