Feedstock pressure in Europe butac market offset by slow demand

18 May 2012 18:00  [Source: ICIS news]

LONDON (ICIS)--European butyl acetate (butac) prices are under downward pressure from ongoing slow demand, but prices remain supported at current levels by upstream tightness in the butanol and acetic acid markets, industry sources said on Friday.

Butac prices are assessed stable at €1,090-1,120/tonne ($1,380-1,418/tonne) FD (free delivered) NWE (northwest Europe) for the week ending 18 May.

"Automotive sector is not strong, the second quarter should be good. The direction for the second quarter is weak to normal, this is why prices do not increase," said a producer.

Butac is used in paints and coatings, and extensively in automotive coatings by some northwest European paint manufacturers.

Demand, which has been slow for months, did not pick up even in May which is traditionally a strong month for solvents used in paints and coatings.

Upstream, butanol supply is tight because of production constraints, including force majeure declaration by INEOS Oxide on oxo-alcohols production at its joint-venture facility in Lavera, France.

The butac producer said it might consider selling its butanol supply instead of the derivative butac in the near future, if butac netbacks did not improve.

"But I also see some possibility of increase of spot [butac] deals by €10-20 [per tonne] because some customers want stable supply and they do not want to approach five to six suppliers," the producer said.

A second butac producer has cut back on its supply into the butac spot market because of the force majeure on butanol.

Meanwhile, BP Chemical’s recent force majeure declaration on its UK produced acetic acid has resulted in supply constraints in the second feedstock used for butac production.

A third butac producer said it is targeting an increase in prices based on the tight upstream markets.

However, most market players are sceptical of a price increase, as the butac market remains fairly well-balanced as the shorter supply has been offset by poor demand. 
 
Additionally, there is limited but sufficient butac supply from Russia to ease some of the tightness in the butac market. Demand for Russian product has increased because of the tighter supply in northwest Europe.

($1 = €0.79)


By: Cuckoo James
+44 (0) 208 652 3214



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