FocusEurope DOP market moves back into profit on market tightness

09 March 2012 16:09  [Source: ICIS news]

LONDON (ICIS)--Europe’s dioctyl phthalate (DOP) market has moved back into profit after supply constraints at several manufacturing sites caused market tightness, market sources said on Friday.

DOP spot prices in Europe have increased by €100/tonne ($132/tonne) in March from February and by more than €250/tonne since January, according to ICIS, far beyond the increases suggested by the feedstock price rises.

The most recent spot deals in Europe have been concluded within the range of €1,550-1,600/tonne FD (free delivered). The highest prices have been achieved in Spain, Denmark and the UK, whereas some deals continue to be done below €1,550/tonne in eastern Europe.

According to producers, with approximate viable costs of €1,450-1,500/tonne, including the March orthoxylene (OX) increase, which settled up by €70/tonne to a record high of €1,130/tonne from the previous month - along with an approximate freight cost of €30-40/tonne for deliveries within western Europe - Europe’s DOP margins had gone through a long period of being in negative territory.

In the second half of 2011, sluggish demand due to long-term negative sentiment caused by European environmental restrictions was accompanied by the slowdown in polyvinyl chloride (PVC) consumption and the consequences of destocking activity.

“Margins were awful,” a producer said.

However, the situation in February has changed, as low inventories due to heavy year-end destocking have coincided with supply constraints at two out of three main sites in Europe.

“The €100/tonne increase in March has been enough to increase our margins just above zero,” the producer said.

A second producer which agreed said; “the target now is to continue to increase prices in relation to raw material costs and improve margins by a further €50/tonne by the end of June”.

A price hike in March phthalic anhydride (PA) contract prices is widely anticipated, while the upward trend in raw material is expected to continue over the next two or three months, according to market sources.

The outlook for the next three months is positive, as ongoing supply constraints and upcoming maintenance shutdowns are likely to support further margin improvements.

It is difficult to forecast beyond the end of the first half of the year, a third producer said. However, most sources agree the European market has become more balanced, as former DOP producers have shifted capacity to alternative compounds.

“The market has adjusted and restructured itself,” the producer said.

“The combined capacity of [Europe’s] DOP producers is just about enough to meet the material needs of customers and export occasional quantities,” it added. 

($1 = €0.75)

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By: Abache Abreu
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