EPCA ’12: Europe MPG market waits for seasonal boost

08 October 2012 17:33  [Source: ICIS news]

BUDAPEST (ICIS)--The European monopropylene glycol industrial grade (MPGI) spot market is being pulled in different directions, but a lot will depend on how seasonal business pans out this winter and where feedstock costs are, market players said on Monday.

They were talking on the sidelines of the 46th European Petrochemical Association (EPCA) meeting in Budapest, Hungary.

European producers have lamented poor profitability for MPGI  for several months this year because of high feedstock propylene costs and the difficulty in passing them on downstream.

The latter has been attributed to subdued demand from the main downstream unsaturated polyester resin (UPR) sector, which has been affected by the soft macroeconomic conditions.

One producer said “there is a lot of pressure to bring prices down due to low demand and no [visible] pick-up. We are waiting for seasonal business [to start].”

The same source added: “It is impossible for prices to go down any further. MPG [monopropylene glycol] margins are terrible – we have not recovered propylene costs since January. We will need to cut back [production] unless margins improve.”

Other MPG producers are thought to have already trimmed output rates in some cases over the past few months because of low margins and subdued demand for MPGI, and instead targeted better performing propylene oxide (PO) derivatives.

MPG sellers have stressed the need to keep MPGI prices steady in October, stating that they had not recovered feedstock-related increases over recent months.

However, MPGI prices have come under downward pressure in some cases in October because of strong competition among certain sellers, lower propylene feedstock costs in October and lacklustre demand for industrial applications.

In week ending 5 October, MPGI spot prices were assessed at €1,200-1,250/tonne ($1,558-1,623/tonne) FD (free delivered) NWE (northwest Europe). This reflected a reduction of €20/tonne at the low end and a rollover at the upper end from the previous week.  

By contrast, one producer said it had achieved a minimum of rollovers, to increases of €40/tonne for MPGI in October, but  there was insufficient market confirmation to substantiate this.

Looking ahead, MPG manufacturers are hoping that the demand from the downstream de-icer and antifreeze sectors over the winter season will kick in, take up some volumes and push prices up.

A few consumers said they could not rule out the possibility of price increases for MPG over the next few months, if there is a strong de-icer season and a resulting surge in demand.  However, they said it remains to be seen how the seasonal business will pan out, depending on the severity of the winter this year.

Players are also mindful of the forthcoming plant maintenance for BASF at its upstream PO and MPG plant at Ludwigshafen in Germany, which is due to at the end of October for two weeks, and in the context of reduced output in the MPG market.

This, in combination with the possible uptick in seasonal demand, could also lead to an upward price tendency, but this remains to be seen. While there have been some initial signs of seasonal buying activity in the downstream de-icer and antifreeze markets, this has not yet started in earnest and MPG availability is sufficient to good, as any production cuts have been tailored to lower demand.

MPG consumers said that they hope the possibility of bio-based competition for synthetic (i.e. propylene based) product may be able to mitigate to some extent the seasonal effects on synthetic MPG supply and demand.

The annual EPCA meeting runs from 6-10 October.

($1 = €0.77)

By: Heidi Finch
+44 20 8652 3214

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