FocusEurope plasticizer margins shrink on upstream hikes, slow demand

10 August 2012 16:24  [Source: ICIS news]

LONDON (ICIS)--August price negotiations in the European plasticizers market have concluded with rollovers to increases of up to €40/tonne, despite price hikes in the upstream naphtha, propylene and orthoxylene (OX) markets.

The European August OX contract has been agreed at €1,090/tonne ($1,346/tonne), up by €45/tonne from the previous month, the August European propylene contract price settled at €1,055/tonne, up by €120/tonne from July, and spot naphtha prices have increased by more than $80/tonne since the beginning of July.

The total upstream price increase suggests a €70/tonne price rise for all main plasticizers, including dioctyl phthalate (DOP), diisononyl phthalate (DINP), diisodecyl phthalate (DIDP), dipropyl heptyl phthalate (DPHP) and dioctyl terephthalate (DOTP).

While maintenance-driven tightness in the DOP market has allowed for increases of around €40/tonne, ample supply and seasonally weak demand have lengthened the markets for DINP, DIDP, DPHP and DOTP, limiting August price settlements to rollovers or increases of €10/tonne from July.

Low inventories, better-than-expected July demand and maintenance at three key manufacturing sites have supported DOP producers’ efforts to pass more than half of the additional cost of upstream propylene and OX, despite weak summer holiday demand.

Most price ideas from producers and average-size buyers were in the low €1,600s/tonne free delivered (FD), although lower prices were heard in the central, eastern and southern European markets.

The main concern for DOP producers in Europe is the availability of competitively priced alternatives such as DINP, DIDP, DPHP and DOTP, a producer said.

This week, ICIS assessed Europe DOP spot prices at €1,590-1,640/tonne FD northwest Europe (NWE), up by €40/tonne from last week.

Producers of high-phthalate plasticizers such as DINP, DPHP and DIDP, have by-and-large absorbed the additional cost of upstream values in August, as weak fundamentals have led to a market surplus, which has hindered sellers’ efforts to pass on bigger increases to downstream customers.

The additional cost of naphtha and OX in the DINP, DPHP and DIDP markets is estimated at €70/tonne. However, sellers have only been able to implement increases of around €10/tonne.

Two producers of DINP and DPHP said most negotiations for August had now been concluded with an increase of €10-20/tonne from July, while two other producers said prices for both DINP and DPHP had by-and-large rolled over from July.

Increases of around €10/tonne have been confirmed by average-size buyers - with an annual intake of 1,000-3,000 tonnes - of all three compounds, whereas rollovers and decreases of up to €30/tonne from July were reported by large-size buyers.

According to market players, this shows there is pressure to increase sales volumes at the expense of margins at some manufacturers.

This week, ICIS assessed prices at €1,630-1,670/tonne FD NWE for DINP and at €1,630-1,680/tonne FD NWE for DPHP.

Whereas the additional cost of upstream propylene in August suggests a €70/tonne increase in DOTP prices, most spot deals have been concluded at a rollover from July because of slow demand. This week, spot prices were assessed at €1,570-1,620/tonne FD NWE.

Prices in the European dioctyl adipate (DOA) and trioctyl trimellitate (TOTM) markets have settled with an average increase of €30/tonne. This week, spot prices were assessed at €1,850-1,950/tonne FD NWE for DOA, and €1,950-2,050/tonne FD NWE for TOTM.

Looking ahead, sellers and buyers of plasticizers in Europe expect substantial increases in September. Producers are hoping to compensate for the margin erosion seen this month, while buyers are willing to absorb greater increases once downstream demand recovers after the summer holiday season. A major buyer said it expects increases of at least €70/tonne in September for high-phthalate plasticizers such as DINP, DIDP and DPHP.

($1 = €0.81)

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By: Abache Abreu
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