US Ashland proposes 3 cent/lb hike for US April MA on energy

15 March 2012 20:54  [Source: ICIS news]

HOUSTON (ICIS)--US producer Ashland on Thursday proposed a 3 cent/lb ($66/tonne, €50/tonne) increase for maleic anhydride (MA) based on changing energy costs, according to a company source.

However, a large MA buyer said the proposal and another by LANXESS were not reasonable.

Ashland increase would be effective on 1 April as contracts allow, the company source said.

Ashland’s proposal follows one made earlier by LANXESS, which cited higher costs for feedstock butane as well as costs associated with the declining price of natural gas.

The Ashland source explained that with natural gas prices falling, the funding that MA producers receive from selling excess steam energy to nearby plants has also fallen, increasing the cost of production.

MA producers position their plants near other facilities. The MA plants produce excess steam, and the energy from the steam is sold to the adjacent facilities to help defray costs. But more of those adjacent facilities are turning to low-cost natural gas and not relying as much on the steam energy from MA producers.

After LANXESS announced its initiative, a source at Huntsman, which typically leads the industry in proposing increases, said the company has yet to decide on whether it will propose an increase.

A large buyer of MA told ICIS that it did not agree with producers’ “steam value” argument and that there would likely be firm resistance by consumers to the proposed increases.

The buyer said he felt producers’ initiatives were “unreasonable” given that a 4 cent/lb increase in late 2011 was predicated on the cost of butane at that time. Although the price has risen in recent weeks, in the mid-190s cents/gal range, it is lower than it was in December.

The buyer said no other producers had yet made announcements, although they have until Friday to do so under contract terms.

February contact prices for molten MA from the US Gulf are assessed by ICIS at 91.20-97.20 cents/lb.

Major US producers of MA include Huntsman, LANXESS, Ashland and Flint Hills Resources.

($1 = €0.77)

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By: Ken Fountain

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