09 October 2012 16:01 [Source: ICIS news]
BUDAPEST (ICIS)--European adipic acid (ADA) demand is not expected to improve before the second quarter of 2013, which could result in continued weak margins, sources said on Tuesday.
Speaking on the sidelines of the 46th annual European Petrochemical Association (EPCA) meeting in Budapest, Hungary, sources said that key downstream fibre demand will not pick up in October as had been expected, and that automotive demand will remain weak.
This is because of bearish macroeconomic conditions, which have limited consumer purchasing power. This has been heightened by a downturn in Chinese growth. Asia is a key importer of ADA from Europe, along with finished goods such as textiles and automotives.
Producers are trying to increase ADA prices to recover margins against raw material costs. Nevertheless, buyers and traders said that prices would not improve while demand is weak.
“The market is very weak still… we still don’t see derivatives so brilliant. If there’s no recovery in demand, there’ll be no recovery in prices,” said a trader.
Opinions are divided, however, and some buyers said that conditions could improve in the first quarter because of restocking following traditional year-end destocking to lower working capital.
“Nobody is optimistic before quarter two. But we think things will pick up in quarter one as pipelines are empty. No-one building inventories. Minimum is being kept in inventories and people are minimising inventories where possible,” said an ADA buyer.
Some sources said that because there is no buffer stock, ADA prices could spike if there are any shortfalls in production or there is an increase in demand.
“Through the year, inventory levels have been normal to low, never normal to high. As soon as demand increases you’ll see prices go up very quickly. It will be very quickly felt through the chain,” said an ADA producer.
The annual EPCA meeting runs from 6-10 October.
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