Europe June MDI settlements stable-to-firm on costs, market balance

20 June 2012 23:59  [Source: ICIS news]

LONDON (ICIS)--European methyl di-p-phenylene isocyanate (MDI) contract settlements have been agreed at a rollover to an increase in June, as higher feedstock costs and production constraints are weighed against reasonable-to-fragile demand, market players said on Wednesday.

Sellers reported increases of €20-50/tonne ($25-63/tonne) for their monthly MDI business based on higher upstream benzene costs and balanced-to-tightening supply, which they attributed to a spate of production constraints, both planned and unplanned.

However, a few manufacturers acknowledged that increases were selective and on a limited number of accounts, as the majority of their business is fixed for the quarter, meaning these prices will rollover into June.

Sellers pegged monthly crude MDI prices in the mid-to-upper €2,000s/tonne FD (free delivered) WE (Western Europe) as a minimum, to up to €2,200/tonne FD WE, but there was no buyer confirmation to substantiate this.

However, buying sources confirmed rollovers for their monthly MDI business in June, stating that demand was insufficient to support any price increases. They reported prices close to €2,000-2,030/tonne FD gross and up to €2,100/tonne FD net.

In terms of absolute numbers, crude MDI contract prices in June were assessed steady at €2,030-2,150/tonne FD WE, with any increases largely incorporated within the range.

Numbers below this were also heard in a few cases, but they were not widely confirmed.

For pure MDI, one seller reported prices at €2,150/tonne as a minimum in June, but there was no other market confirmation to substantiate this. In fact, one producer said that the range remains largely steady at €2,130-2,200/tonne FD WE in June, as any increases were absorbed within the existing range.

Looking to July/the third quarter, manufacturers are bullish about price hikes ranging from €50-150/tonne, depending on source and contract type. They said that price increases for MDI are necessary in view of higher raw material cost pressure and the need to achieve re-investment economics.

One MDI producer added; “it will have a firm (pricing) stance as stocks are low and the benzene direction is not clear, there is nothing to lose.”

Buyers, however, said they will strongly resist any upward price move in July/the third quarter, stating that downstream demand is not sufficient to support this.

They also acknowledge that supply is sufficient despite some production difficulties, which they said illustrates that demand in the main downstream construction sector is lower than expected at this time of year because of underlying economic concerns.

Sellers, however, maintain that consumption continues to hold up reasonably well in northwest and central Europe, although they concede that activity in the Mediterranean is subdued, as it has been more affected by heightened economic concerns about the eurozone.

In production news, Bayer MaterialScience announced on 14 June that it had declared force majeure on its isocyanates MDI and toluene di-isocyanate (TDI), including their derivatives in the Europe, Middle East, Africa (EMEA) region because of an unforeseeable and sudden failure of an external supplier to deliver syngas at the Brunsbuettel site in Germany.

Further details on the expected duration of the outage at the two isocyanate units at Brunsbuettel are not yet available, as confirmed on 20 June.

BMS’s MDI plant at Krefeld-Uerdingen, Germany, is in its restart phase, following a recent planned turnaround.

Dow Chemical’s MDI facility at Stade, Germany, is back running again since 6 June, following a recent extended turnaround. Although operating rates have not yet been fully ramped up, the unit went into a lengthy maintenance period in mid-April which was originally expected to last around six weeks.

BASF’s MDI plant at Antwerp, Belgium, continues to run at reduced operating rates during June because of ongoing upstream limitations.  

BorsodChem’s MDI and utility operations at Kazincbarcika, Hungary, is expected to enter into an annual maintenance turnaround at the end of July for around three to four weeks.

($1 = €0.79)

By: Heidi Finch
+44 20 8652 3214

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