08 October 2012 17:52 [Source: ICIS news]
BUDAPEST (ICIS)--High benzene feedstock costs remain the concern rather than underlying demand for European methyl di-p-phenylene isocyanate (MDI), an MDI producer said on Monday.
The producer was talking on the sidelines of the 46th European Petrochemical Association (EPCA) meeting in Budapest, Hungary.
MDI demand has increased by around 8% on average in Europe over the past few years, according to the producer, and this growth potential is expected to continue in view of the legislative drive to improve energy efficiency in the insulation sector.
MDI is a main insulating material, and stricter legislative requirements that require thicker insulation means more usage of insulating materials such as MDI.
The producer said that the underlying legislative requirements are offsetting to some extent the economic-related slowdown in demand.
Other MDI players said that their demand is reasonable to slow, with some MDI buyers noting a downturn in demand for economic reasons. Traditionally, MDI demand slows in the fourth quarter for weather-related reasons.
MDI consumption into the downstream automotive sector remains subdued because of soft macroeconomic conditions. MDI also finds outlets in the appliances sector, where demand has held up reasonably well, particularly in eastern Europe because of the underlying growth potential in the emerging market, in contrast with the more mature northwest European market.
However, dmand in southern Europe across all end-sectors remains depressed, as it has been most affected by the more pronounced economic constraints compared with the rest of Europe.
MDI producers have stressed the underlying need to increase prices to recoup the high upstream benzene costs, particularly the hike in August, and to restore profitability. They said that even though benzene costs have come down slightly in September and October, this was not sufficient to offset the August benzene hike.
MDI buyers, however, strongly resist any possible upward price move, stating that demand is not sufficient to support this. They said on top of the economic slowdown in demand, there is also the seasonal lull in the fourth quarter, and availability remains sufficient to good, despite some production constraints.
European MDI prices were assessed in September at €2,030-2,150/tonne ($2,636-2,792/tonne) FD (free delivered) W Europe for crude product, according to ICIS pricing.
Some MDI producers, however, have conceded that price increases are proving difficult to achieve in October and the fourth quarter, as high feedstock costs are being weighed against seasonally slowing demand and sufficient supply. Buyers have so far confirmed stable prices for October and the fourth quarter.
The annual EPCA meeting runs from 6-10 October.
($1 = €0.77)
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