Europe acrylate prices move up but market still under pressure

19 April 2012 13:18  [Source: ICIS news]

LONDON (ICIS)--While European acrylic acid (AA) and acrylate esters prices are moving up in April, the market is still struggling to keep pace with feedstock costs and producers might curb utilisation rates in the coming weeks, sources said on Thursday.

While many were hoping for a strong purchasing upturn in the second quarter as the peak season for the construction and coatings segments draws nearer, the consensus is largely that this has not happened.

“Demand is good this month, but not booming,” said one acrylates trader. “Let’s not kid ourselves.”

However, the trader added that he remains positive for May and June, noting that the Easter break this month had to be factored into discussions about April demand.

But one supplier was even less sanguine: “Demand is not good for this time of year. Coatings activity is not there, and it is worrying. The season should be starting in April.”

Meanwhile, sellers have had to contend with sharp price rises upstream, and suppliers point out that they are still struggling to adequately compensate for the continual gains seen for propylene since the beginning of the year.

Propylene prices have moved up by €300/tonne ($395/tonne) since January, reaching a record high of €1,245/tonne free delivered (FD) northwest Europe (NWE) in April, while the acrylates sector has been slower to keep pace with these movements.

Acrylate producers have been pushing for higher increases since the beginning of 2012, but have been hindered by slow end-use demand, aggressively priced spot material coming into the region from Asia and Russia, and a generally bearish sentiment given the current macroeconomic malaise.

April has seen increases of €40-50/tonne in line with higher feedstock costs, and higher in the case of 2-ethylhexyl acrylate (2-EHA) and ethyl acrylate (EA), where some shortness has been seen.

“There are some availability issues for 2-EHA in particular, and the dynamics of that market are changing,” said one buyer.

However, some of the more ambitious price targets for sellers this month have had to be scaled down, as consumers resist these increases. With end use markets such as paints and coatings struggling amid the wider economic challenges in the second quarter, some speculate that they are simply refusing to move up despite the pressure from feedstock markets.

As a result, players expect that producers will curtail production output in the coming weeks because of poor economics.

“It is very much a guessing game at this stage,” said a distributor. “We have seen some pre-buying ahead of May already.”

Two major European suppliers are already said to be running at reduced utilisation rates, while another is shutting down its AA, EA and 2-EHA lines for annual maintenance and a five-year catalyst change (on AA only) in late April until the middle of May.

While there are no firm indications where propylene will settle for May, acrylate sellers are braced for another modest increase and are already pushing for price rises beyond any upward movement on feedstocks.

“We will be looking for any propylene increase plus a bit more, as our margins are still under significant pressure,” said one supplier.

With current Asian prices high and tight supply levels in the US, players also do not expect to see imports into the NWE region in the coming weeks, which also lends weight to proposed further price increases for May.

($1 = €0.76)

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

By: Truong Mellor
+44 208 652 3214

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