22 October 2012 18:32 [Source: ICIS news]
HOUSTON (ICIS)--US methyl methacrylate (MMA) market players expressed surprise on Monday at the size of Dow Chemical’s recent price increase nomination for November.
Dow announced on 15 October that it is seeking a price increase nomination of 7 cents/lb ($154/tonne, €119/tonne), effective on 1 November or as contracts allow.
In the nomination letter, Dow said the effort is mostly fuelled by increasing propylene prices and expected volatility in the market.
US spot prices for refinery-grade propylene (RGP) have increased to the mid-40s cents/lb from the mid-30s cents/lb in the past month, as assessed by ICIS.
“We were stunned by the increase nomination,” an MMA buyer said. “There’s not enough iPhone 5 demand in the world to justify the nomination.”
The buyer said Dow will struggle to sell material at the new price, which would be about $1.15-1.20/lb.
Other buyers expressed similar surprise, arguing that the end of the year is a poor time to attempt to increase prices because inventory controls are becoming more common.
“It’s the same mistake they make every year,” the buyer said. “They attempt to push prices higher at the end of the year and it never works.”
Another buyer said the supply-demand balance is currently favouring buyers because supply is long and the key demand segment – the US coatings market – is in its seasonal slow period.
Other producers said they were more surprised by the size of the nomination, saying there is room for prices to move higher.
“Seven cents is quite a lot,” a producer said. “However, prices need to move up some, because we can’t eat all the costs.”
Another producer said it will take a wait-and-see approach before deciding what it will do with its November contracts.
“We’ll probably let the dust settle for a week or so,” the producer said.
Major US MMA producers include Dow Chemical, Evonik and Lucite.
($1 = €0.77)
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