Europe Aug MDI contract prices steady despite higher upstream costs

08 August 2012 23:59  [Source: ICIS news]

LONDON (ICIS)--European methyl di-p-phenylene isocyanate (MDI) contract prices in August have largely rolled over, despite higher upstream benzene costs, because a large proportion of longer-term contracts are already in place, market players said on Wednesday.

A number of summer holiday absences has also resulted in prices rolling over, sources added.

Some MDI contracts have been fixed on a bi-monthly basis for July and August to cover the summer holiday period. In addition, a number of crude MDI contracts were agreed on a quarterly basis, depending on supplier, meaning these prices will roll over into August.

Even those that had monthly MDI business said prices followed the same stable trend as seen on longer-term contracts.

To reflect this, crude MDI contract prices were assessed steady at €2,030-2,150/tonne ($2,506-2,654/tonne) FD (free delivered) NWE (northwest Europe) and pure MDI at €2,130-2,200/tonne FD NWE, according to ICIS. Numbers either side of the ranges were also heard, but they were seen to reflect exceptions rather than the norm.

Producers stressed the underlying need to raise MDI prices as soon as practically possible on the back of higher production costs. They said they would look to raise MDI prices after the summer holidays in September and October, depending on contract type. One manufacturer said it would look to pass on a hike of €150/tonne for its MDI contracts as of 1 September.

MDI targets for September from other suppliers were not yet forthcoming, although they suggested an upward price move for MDI would be necessary because of intensified cost pressure. They acknowledged there would be more chance of price increases in October rather than in September for crude MDI because a number of their contracts are agreed on a quarterly basis.

However, looking to September, buyers said they would strongly resist any price increase attempts for MDI despite the intensified cost pressure, stating that demand remains fragile because of economic uncertainty and because supply was good, which would not support any upward price movement.  

In fact, one pure MDI buyer in the Mediterranean said it would push for price reductions in September despite higher upstream benzene costs. It said that this is in view of particularly soft demand in southern Europe, which has been most affected by the economic turmoil and intensified downstream competition.

Crude MDI consumption in the downstream construction industry has held up reasonably well in northwest Europe, according to some selling and buying sources, although ongoing market softness continues in southern Europe because of more pronounced economic constraints.

Views on MDI demand from the downstream automotive sector are mixed as exports of premium vehicles continue to fare reasonably well, while demand for smaller vehicles manufactured in the Mediterranean is more subdued.

Crude MDI used in the downstream appliances sector remains reasonable-to-good, sources said.

Pure MDI demand into the downstream footwear industry remains seasonally low and one buyer said its demand continues to lag behind the same period last year for economic reasons. Pure MDI into the food packaging sector, however, remains fairly resilient to economic fluctuation.

The MDI market is largely balanced as a spate of production constraints, both planned and unplanned, is offsetting any signs of lower demand.

In manufacturing news, Dow Chemical’s MDI operations in Stade, Germany, and in Estarreja, Portugal, continues to run at reduced rates over the last few weeks because of upstream related constraints.

Planned maintenance at BorsodChem’s isocyanates including MDI and utility facilities in Kazincbarcika, Hungary, is thought to be ongoing. The maintenance turnaround started at the end of July and is expected to last until the second half of August.

BASF’s MDI plant in Antwerp, Belgium, is expected to enter into a scheduled maintenance shutdown in the autumn, which is likely to last around six weeks. Market players have said the turnaround will include routine maintenance as well as some capacity expansion, although the latter has not been confirmed at source.

($1 = €0.81)

By: Heidi Finch
+44 20 8652 3214

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