29 May 2012 16:04 [Source: ICIS news]
LONDON (ICIS)--Polycarbonate (PC) producers in the European and the ?xml:namespace>
Bayer MaterialScience (BMS) and SABIC Innovative Plastics between them control over 80% of the PC market in Europe and the
“Niche commodities, such as PC, methyl di-p-phenylene isocyanate (MDI) and toluene di-isocyanate (TDI), have a concentrated supplier base and historically have been able to increase margins and generally maintain them even in a weak supply-driven environment,” said Bernstein in a note published today.
It claims BMS was able to achieve earnings growth straight after the 2008 financial crisis though rising raw material costs and very weak demand later in 2011 and in the first quarter of 2012 squeezed margins, especially for PC and MDI.
It added: “We believe consensus underestimates the power of this concentrated industry structure and its importance to attractive, sustainable margins for PC.”
The group also claims that earnings will be supported by a lack of new capacity coming onstream over the next couple of years.
“MaterialScience margins are set to improve through 2012 and beyond since the industry’s capacity surplus is working its way through the system and prices are increasing again,” it said.
Most new capacity came onstream in 2011 and early 2012, with the next wave not due onstream until 2014, Berstein said.
The analyst group today upgraded its target price for Bayer from €60 ($75) to €64 and boosted its outlook for the group to “outperform” from “market perform”. It also expects positive developments in Bayer’s CropScience and HealthCare divisions.
At 15:57 GMT, Bayer's share price was trading at €52.16 on the XETRA stock exchange, up 2.27% from the previous close.
BMS and SABIC Innovative Polymers did not respond immediately to a request for comments.
The graph below presents the ICIS price history for PC. It shows how PC prices recovered strongly following the 2008 financial crisis.
($1 = €0.80)
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