19 March 2012 00:00 [Source: ICB]
Since the start of the year, methyl methacrylate (MMA) prices in Asia and the US - buoyed by rising feedstock costs, tightening supply and firming demand - have risen, while prices in Europe have only continued to fall.
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Aiming high: some producers are seeking triple-digit increases
During the week ending March 2, ICIS assessed European MMA spot prices at €1,6251,700 ($2,123-2,221)/tonne FD (free delivered) NWE (Northwest Europe), up by €50/tonne at both ends of the range. Spot prices gained only €5/tonne at the top through March 9, but with feedstock acetone extremely tight and MMA demand set to build, any softening is unlikely.
BIG INCREASES IN STORE?
Europe's acetone supply has been so low, industry sources say, that availability has had a greater influence on deal-making than cost.
Prices have responded accordingly. Between the start of January and March 9, spot acetone rose by 80%, while contracts for February were 23% higher than contracts for December, according to ICIS assessments.
Acetone remains tight, but demand for spot material has slowed somewhat, according to resellers to the solvents sector. Buyers are covered for the first half of March, they explained, while other customers have simply backed off from the high prices. Producers, however, are certain that acetone will remain tight until May or June.
The year's slow start has prevented MMA producers from passing along their rising feedstock costs, but market sources expect demand to improve in March, to strengthen rapidly in April, and to remain healthy until June.
As of March 9, March contracts were settling between rollovers and €75/tonne hikes, with increases averaging around €2540/tonne. Negotiations were ongoing and expected to conclude the week ending March 16.
Contracts for April and second-quarter contracts are expected to include more significant gains. UK-based producer Lucite International announced in late February that it would target triple-digit increases for the second quarter.
One producer said he would probably target triple-digit increases in April monthly contracts. Another said prices will firm in the coming weeks, and any contracts that roll over in March will certainly increase in April.
Downstream, manufacturers of polymethyl methacrylate (PMMA) were already preparing in late February to pass along the expected increases. "We're looking to pass on increases [in the second quarter]," one told ICIS. "Raw material costs are moving up, and we need to recover some margins. Increases should be in line with MMA."
"There will be a price increase for the second quarter due to the price increase of monomer," said another PMMA manufacturer. "We do not yet know the magnitude, but we should know by around 15 March."
In the US, March contract prices for MMA were assessed by ICIS at 120130 cents/lb ($2,646-2,866/tonne, ) FD (free delivered), up by 10 cents/lb, or 9%, from February, largely in line with announced nominations of 8-13 cents/lb.
Most buyers accepted the nominations, given the 20 cent/lb, or 47%, increase included in February barge acetone contracts.
Buyers in the coatings market initially resisted, arguing that sales and demand could not support higher prices. By the start of March, however, most had accepted the increases. Demand had improved, they said, owing to unusually warm weather and encouraging construction data.
TIME WILL TELL
Some buyers noted that February sales and orders could be genuine new demand, pre-buying ahead of price-increase nominations or a combination of both - only time would tell.
As of March 9, buyers in the plastics market were not yet ordering large volumes of material, but they expect that the feedstock costs will be passed along when demand picks up in spring and summer.
The US supply of MMA has been tight. According to market sources, two US producers looking for material to cover upcoming contracts (5,000 tonnes and 3,000 tonnes, respectively), have struggled to find a source in Asia. Low inventories and upcoming turnarounds in the region have increased the risk of passing product through the arbitrage window with the US.
That window is normally closed, but with MMA contracts in the US rising quickly and set to gain speed, the gap with Asia has widened appreciably.
Between late January, when Lunar New Year celebrations ended, and March 9, MMA spot prices in Asia rose only 5% to $2,1502,200/tonne CFR (cost and freight) SE (Southeast) Asia for cargoes of 20200 tonnes. The difference with March contracts in the US - $450/tonne or more - easily exceeds the estimated $150/tonne cost of shipping.
However, most major Asian producers have been unable to take advantage of the opportunity. Ongoing and upcoming turnarounds at production facilities in the region have reduced inventories to uncomfortably low levels.
"We were asked to sell 3,000 tonnes of MMA, but we rejected it, as we are low on stocks," said a source at Japanese producer Asahi Kasei. The company's 100,000 tonne/year MMA plant in Kawasaki, shut down for maintenance on February 22, was expected to restart on March 13.
Mitsubishi Rayon's 50,000 tonne/year No 2 line in Otake, Japan, and Formosa Plastics' (FPC) acetone cyanohydrin-based 98,000 tonne/year MMA unit in Mailiao, Taiwan, are both 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.
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