Europe acrylates producers look to regain lost margins with price rise

08 March 2012 12:29  [Source: ICIS news]

LONDON (ICIS)--March contracts in the European acrylic acid (AA) and acrylate esters market look set to rise significantly, as continued price hikes for feedstock propylene put firm upward pressure on suppliers looking to regain lost margins, sources said on Thursday.

Since January, the European propylene contract has risen by €200/tonne on the back of stronger naphtha prices and a squeeze on cracker margins. Both February and March saw increases of €90/tonne ($118/tonne), with sellers initially looking for a triple digit price rise for both months.

However, the acrylates sector has struggled to keep pace with these monthly increases because of uncertain end-use demand, aggressively priced spot material from Asia and Russia, and a generally bearish sentiment given the wider economic malaise.

January acrylates contracts rolled over, while February saw only modest increases of €30-40/tonne, with some contracts even rolling for the second consecutive month this year.

While buyers were able to largely resist the scale of price increases sought by producers in February, several conceded that they expect March contracts to move up significantly in light of another €90/tonne rise for propylene.

“Price talks are really cost driven now, as opposed to this time last year when everyone was focused on the supply/demand balance,” said one consumer. “We are expecting the full [propylene] increase. There is a big push from producers."

One supplier said that it was targeting price increases of €70-120/tonne for March, depending on grade and starting point.

“We were already struggling with the higher propylene costs in February,” the supplier said. “So we are looking for serious increases now.”

Another major European seller said that it was already seeing early signs of acceptance of the propylene increase.

“The lower price material has been mopped up now,” the seller said, adding that it believed a three-digit increase was possible this month.

One buyer said that it has seen spot pricing already move up by €40-50/tonne in the last week, although availability remains healthy.

“It’s all feedstock driven,” the buyer said. “This should make March contract talks interesting.”

While there is still an unclear picture of how demand will shape up for March and beyond, the majority of players are positive so far.

“The orders in the book [for March] are okay, perhaps not amazing, but we will meet forecasts,” one producer said. “We also have the coatings season to come.”

Another supplier said: “Demand is improving now, not mind-blowing, but the crux of it is that better demand will mean a tighter market, because supply is still the same.”

While the milder weather across most of Europe is helping drive more buyer interest within the construction and coatings sectors, this may not be having an immediate effect on acrylates consumption.

“As we get closer to the traditional peak season,” one trader said, “that’s when we’ll see more bullishness in the market.”

($1 = €0.76)

Follow Truong Mellor on Twitter for daily tweets on the aromatics markets

By: Truong Mellor
+44 208 652 3214

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