23 August 2012 14:18 [Source: ICIS news]
LONDON (ICIS)--Sellers in the European plasticizers market aim to increase spot prices by at least €50/tonne in September to offset any potential rise in upstream costs and compensate for margin erosion in August, market sources said on Thursday.
US-based Eastman Chemical has announced a target price increase of €0.05/kg (€50/tonne, $63/tonne) in Europe, the Middle East and Africa for dioctyl terephthalate (DOTP) with effect from 1 September – or as contracts allow – on the back of rising production costs, particularly energy and feedstock propylene.
Most producers think it is too soon for September price negotiations, as upstream values have not yet settled and activity remains thin on poor demand, summer holiday absences and the peak of the turnaround season. However, they agree that increases greater than €50/tonne will be needed to recover margins.
The additional feedstock cost for producers of dioctyl phthalate (DOP), diisononyl phthalate (DINP) diisodecyl phthalate (DIDP), dipropyl heptyl phthalate (DPHP), DOTP, dioctyl adipate (DOA) and trioctyl trimellitate (TOTM) in August was estimated at €70/tonne.
However, seasonally low demand limited producers’ targets, and August negotiations concluded with a rollover for DOTP, a €10/tonne increase for DINP and DPHP, a €30/tonne increase for DOA and TOTM and a €40/tonne increase for DOP – which remains tight on production constraints.
“The upstream cost increase in August was very unfortunate,” a producer said.
Furthermore, a price hike is widely expected in the September propylene contract, with ongoing negotiations pointing to a rise of €80–100/tonne from the previous settlement.
A DOP producer said it would be too ambitious to expect September price increases to fully compensate for the August upstream price hike, but added that the full additional cost of propylene and orthoxylene (OX) in September will be passed on downstream.
Some buyers seem willing to absorb substantial increases once downstream demand recovers, with two key customers of high-phthalate plasticizers expecting rises of at least €70/tonne in September.
Most players expect a rebound in market activity next week.
“This is the last week of the holiday period,” an ortho-phthalates producer said.
“September is normally a good month, and this year demand has been better than expected,” a supplier of non ortho-phthalate plasticizers said.
There is some concern that buyers might return to the market next week trying to build inventories in anticipation of September price increases, as inventory levels at some accounts are low.
($1 = €0.80)
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