Europe MDI prices stable to up in May on costs, market balance

16 May 2012 23:59  [Source: ICIS news]

LONDON (ICIS)--European methyl di-p-phenylene isocyanate (MDI) monthly contract prices in May have been agreed stable to slightly firmer, with higher costs and balanced-to-tight supply weighed against relatively flat demand, market players said on Wednesday.

Producers said they had passed on increases of €20-50/tonne ($25-63/tonne) for crude MDI, particularly for lower-priced accounts in May. Buyers said they had agreed on rollovers to rises of €20/tonne. 

The upward  price move was largely driven by higher upstream bezene costs in May and the need for margin recovery, as well as balanced to snug supply.

In absolute numbers, crude MDI prices in May were generally confirmed within the range €2,030-2,150/tonne FD (free delivered) NWE (northwest Europe). This represents an increase of €20/tonne at the low-end, but a rollover at the upper part of the range.

On top of this, there are also some quarterly crude MDI contracts already in place, where prices have rolled over into May. This follows the recent implementation of price increases at the start of the quarter.

For pure MDI, sellers said they had secured price increases of €40-50/tonne, while the buy-side confirmed average rises of €30/tonne in May.

In absolute numbers, however, both buyers and some sellers agreed that pure MDI prices of  €2,130-2,200/tonne FD were still valid in May, with any increases largely incorporated within the range.

There was also talk of numbers either side of the ranges, but they were not widely confirmed.

Views on crude MDI demand are mixed. Some buying and selling sources said that demand into the construction sector is reasonable, but not as seasonally good as it should be at this time of year. This is because of the underlying cautious economic sentiment.

Some sellers, however, maintain that crude MDI consumption is good and has seasonally improved from the first to the second quarter, with little to no negative economic impact on demand.

For pure MDI, consumption is holding up relatively well, although some suggest that this is partly linked to supply constraints rather than underlying demand being particularly good. One buyer said that offtake in the downstream footwear sector is starting to slow because of seasonal and economic factors.

The MDI market is balanced to tight, depending on source and grade. Pure MDI supply is more restricted than for crude MDI on the back of  better downstream performance over recent months and its lower yield, which has meant it is more impacted by production constraints than for crude MDI.

Some sellers, however, maintain that they are low on stocks for both grades, because of a spate of production constraints, planned and unplanned.

However, crude MDI buyers said they have sufficient supply and have not experienced any limitations. In fact, one main buyer said it has more product available than it requires.

In production news, planned maintenance at Dow Chemical’s MDI facility at Stade, in Germany is ongoing. The unit went down in mid-April and it is is expected to resume operations by early June. The company has also experienced recent production difficulties at its other MDI plant at Estarreja, in Portugal.

Bayer MaterialScience’s MDI unit at Taragona, in Spain is down for planned maintenance. The turnaround is expected to last for around 10 days in total, with a restart planned to take place at this end of this week.

BorsodChem is preparing for its annual maintenance turnaround at its isocyanate operations and utility sites, which is due to take place at Kazincbarcika, in Hungary in July/August. The turnaround is expected to start on 26 July and last for around three to four weeks.

($1 = €0.79)

By: Heidi Finch
+44 20 8652 3214

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