FocusEurope epoxy players expect tough talks in September

21 August 2012 12:30  [Source: ICIS news]

By Janos Gal

Tough pricing talksLONDON (ICIS)--Negotiations over the European epoxy resins contract in September are expected to be tough as producers target increases, while buyers remain reluctant to accept any rises on the back of poor derivative demand, sources said on Tuesday.

"I ordered some material from Asia as soon as feedstock costs increased at the end of July, to have a buffer against European price increases in September," an epoxy resins buyer said.

Asian liquid epoxy resins (LER) prices are at $2,570-2,630/tonne (€2,081-2,130/tonne) free on board (FOB) northeast (NE) Asia iso-tank. Delivery costs are about €250-300/tonne from door-to-door and it can take up to eight weeks for a cargo to arrive.

Latest data by statistics agency Eurostat shows that in May, 12,989 tonnes of epoxy resins were imported to the EU from the rest of the world, up from 9,516 tonnes in April. Exports also increased, from 12,552 tonnes in April to 15,311 tonnes in May.

As a result of increasing feedstock costs, most European epoxy resins producers are targeting price hikes in September.

The European benzene contract price for August was agreed at €1,061/tonne, an increase of €108/tonne from the previous month; while co-feedstock propylene contract prices settled at €1,055/tonne, up by €120/tonne from July.

US-based producer Momentive announced that it would increase the price of LER and solid epoxy resins (SER) in Europe, the Middle East and Africa by €130-€150/tonne from 15 August or as contracts allow. The pricing adjustment is driven by increases in the cost of key raw materials, including benzene, propylene and acetone.

Similarly, Czech–based Spolchemie and two other producers announced increases of €50-100/tonne for LER and SER with effect from 1 August, or as contract terms allow. This was to increase low margins and to cover significant raw material cost increases. It remains to be seen whether buyers will accept the targeted hikes.

"It might be possible to increase prices by €50/tonne, but nothing more because the market just won't take it," an epoxy resins trader said.

However, producers said they will insist on passing on feedstock cost increases even if they lose customers because the current situation is unsustainable.

Sales are poor as nobody is keen on buying in the current uncertain economic climate, especially because construction and automotive demand continues to fall in Europe.

Statistics are showing no signs of improvement. Registrations for new passenger cars in the EU in June fell for the ninth consecutive month, according to data from the European Automobile Manufacturers' Association. In the first half of 2012, new car registrations in the EU fell by 6.8% year on year to 6.64m units.

EU construction output in June dropped by 1.7% compared with the month before, Eurostat said. On a year-on-year basis, output in June decreased by 5.8% in the EU and by 2.8% in the eurozone, Eurostat added.

This has resulted in falling demand from the paint and coatings industries, which is down by about 20-25% compared with the same time last year. Sales to the automotive and construction sectors are down by about 10-15% or more, depending on region.

In order to balance supply with demand, most feedstock bisphenol A (BPA) plants are running at 50-60% of operating rates. Epoxy resin plants are at 60-70%, while polycarbonate plants are at 45-60% capacity.

Because most market participants are on holiday and several plants are shutdown for maintenance, little activity is expected during the next two weeks, but tough negotiations are likely once players return.

"Even if our sales drop and we lose some customers we will be adamant to pass on these increases because the current situation is unsustainable," an epoxy resins producer said.

($1 = €0.81)  

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By: Janos Gal
+44 208 652 3214

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