Slow demand hinders price targets in Europe plasticizer market

02 August 2012 14:05  [Source: ICIS news]

LONDON (ICIS)--Slow summer holiday demand and competitively priced offers are hindering the efforts of European plasticizer producers to pass on the additional cost of feedstock naphtha, propylene and orthoxylene (OX) to their downstream markets, sources said on Thursday.

Producers have announced target increases of €5080/tonne on higher upstream costs. The August European propylene contract price has settled at €1,055/tonne, up by €120/tonne from July. An initial European August orthoxylene (OX) contract has been agreed at €1,090/tonne, up by €45/tonne ($55/tonne) from the previous month; and spot naphtha prices have increased by more than $100/tonne since the beginning of July.

However, buyers aim to limit any increase, pointing to ample availability and weak demand. Activity in the downstream polyvinyl chloride (PVC) and construction markets has dipped to its lowest level so far in 2012, according to market players, while demand from the automotive industry has also seen a substantial decrease, which has affected sales volumes in the European plasticizer market.

The ability of plasticizer producers to increase prices in line with upstream costs depends not only on supply and demand fundamentals, but also on the pricing strategies of sellers of alternative compounds, as many buyers can easily pick and choose compounds according to prices and availability. Negotiations continue.

In the dioctyl phthalate (DOP) market, a producer announced an €80/tonne price increase with effect from 1 August, aimed at passing through the higher cost of propylene and OX. “The goal is to achieve a price in the range of €1,6201,670/tonne immediately,” the producer said.

Sellers hope that low DOP inventories and maintenance work at some manufacturers will support increase targets. However, buyers say there are DOP offers in the market with an increase of around €50/tonne £40/tonne in the UK from July. Negotiations continue.

In the diisononyl phthalate (DINP) and dipropyl heptyl phthalate (DPHP) markets, an increase of approximately €70/tonne is needed in order to pass the full additional cost of naphtha and OX, but European producers say this will be difficult to achieve because of seasonably low demand.

Some producers have already settled most price negotiations for August with minor increases of €1020/tonne from July and free delivered (FD) prices at €1,6501,690/tonne for DINP and €1,6601,700/tonne FD for DPHP.

Other DINP and DPHP producers continue to push for increases of up to €50/tonne in order to offset higher feedstock naphtha and OX, but thus far they have had limited feedback from customers. It is still early, as both sellers and buyers are still testing the market and negotiating prices, a producer said.

Buyers of DINP and DPHP, on the other hand, have reported offers and deals concluded with rollovers and even decreases from July into August.

According to a DINP buyer, August offers in the UK from European suppliers are at around £1,290/tonne FD (€1,633/tonne), unchanged from July.

According to some large buyers with an annual plasticizer intake of more than 3,000 tonnes  negotiations have now been finalised and August prices are in the low €1,600s/tonne FD for DINP, down by €2030/tonne from July, and in the high €1,500s/tonne FD for DPHP, down by €30/tonne from July.

According to these buyers, the decreases in DINP and DPHP prices are partly driven by the availability of competitively priced alternative compounds such as dioctyl terephthalate (DOTP). However, producers say that DOTP supply in Europe is too short to have an impact on overall market prices.

ICIS assessments take into consideration trades and negotiations between sellers and end-users with an average annual intake of approximately 1,0003,000 tonnes/year.

In the European DOTP, dioctyl adipate (DOA) and trioctyl trimellitate (TOTM) markets, negotiations are underway, with a clearer picture of August prices expected early next week.

Sellers say they are unlikely to pass through the full feedstock cost increase to their customers because of seasonably soft demand in downstream markets. “Price increases will be moderate, despite significant cost increases,” a producer said.

However, buyers have received offers from Turkish and US suppliers for August delivery with a rollover from July and prices at £1,2501,280/tonne (€1,582-1,620/tonne) FD UK. No deals had been concluded at the time of writing.

($1 = €0.82, €1 = £0.79)

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By: Abache Abreu
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