Europe MDI July, Q3 contracts hold steady in balanced market

18 July 2012 23:59  [Source: ICIS news]

LONDON (ICIS)--European methyl di-p-phenylene isocyanate (MDI) contract settlements have mostly rolled over into July and the third quarter, as the needs to recoup lost margins are being weighed against fairly balanced market conditions, market players said on Wednesday.

MDI contract prices in July are assessed steady at €2,030-2,150/tonne ($2,506-2,654/tonne) FD (free delivered) NWE (northwest Europe) and €2,130-2,200/tonne FD NWE for crude and pure grades respectively, according to ICIS.

Prices above and below these ranges were also heard, but were not seen to reflect the general market level.

MDI producers had attempted to raise prices across the board in July and the third quarter in view of the cumulative benzene feedstock cost increases in May and June, which they had not recovered, and the need to achieve re-investment economics. However, buyers strongly resisted, stating demand remains fragile and was insufficient to support any general upward price movements.

Some selective increases, ranging from €10-80/tonne were also reported by selling sources for July and the third quarter, but there was insufficient market confirmation to substantiate this as a general trend.

By contrast, one buyer said it had secured a mix of rollovers and downward price adjustments of €30/tonne for its third-quarter crude MDI contracts, but the downward pressure was not widely confirmed by others. 

MDI demand remains reasonable to slow, depending on source. Sellers maintain demand is holding up reasonably well in northwest Europe and is in line with seasonal expectations for this time of year, although buyers said consumption remains sluggish, particularly in the Mediterranean, where the impact of economic limitations are particularly affecting southern Europe.

MDI availability has been largely sufficient, despite a number of production constraints, amid signs of slowing demand. There is some talk in the market that product is on the snug side from sellers, but buyers maintain they are sufficiently covered and have not experienced any supply problems.

News of a price reduction of €68/tonne in the European July benzene contract price, which was settled at €953/tonne FOB (free on board) NWE, came too late to have any effect on MDI prices in July, although sellers are closely monitoring the situation. Buyers, however, maintain MDI prices are mainly driven by market fundamentals rather than feedstocks.

Early indications for MDI business in August centre on a rollover as fairly balanced market conditions and summer holiday absences are weighed against the recent firming in the upstream benzene spot market, where prices are trading significantly above the July contract price level.

In manufacturing news, Bayer MaterialScience lifted the force majeure this week on its MDI and its toluene di-isocyanate (TDI) supplies in Europe, the Middle East and Africa, following the recent resolution on upstream gas supply constraints. The force majeure had come into effect in mid-June because MaterialScience’s MDI and TDI production in Brunsbuettel, Germany, had been disrupted by upstream gas supply problems from its third-party supplier.

BASF’s MDI facility in Antwerp, Belgium, is still running at reduced operating rates, but is expected to be running at full capacity by the end of July. Output at the MDI unit was reduced during June because of some upstream supply constraints. The same unit is expected to undergo an annual turnaround in September/October, although further details were not available at the time of writing.

Dow Chemical’s MDI plant in Stade, Germany, is now running normally, following some recent output constraints. However, production at the company’s other MDI unit in Estarreja, Portugal, continues to be restricted because of ongoing upstream supply limitations. The latter is expected to be resolved in the next few weeks.

Operating rates at BorsodChem’s MDI M2 plant in Kazincbarcika, Hungary, are likely to be reduced over the next week for planned maintenance, which is expected to last until the second half of August. The company’s other MDI M1 unit, also at the Hungarian site, has remained idled since 2009 for market reasons with a company source saying there are no current plans to restart.

($1 = €0.81)

By: Heidi Finch
+44 20 8652 3214

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