UpdateGermany's Bayer MaterialScience Q3 PU sales rise by 10.2%

30 October 2012 12:37  [Source: ICIS news]

(adds segment financials, MDI/TDI price movements)

Bayer headquarters in Leverkusen, GermanyLONDON (ICIS)--Sales for Bayer MaterialScience’s polyurethane (PU) business unit rose by 10.2% to €1.57bn ($2.01bn) in the third quarter of 2012, when compared with the same period last year, driven mainly by higher sales volumes in all product groups and regions, according to the company’s financial report issued on Tuesday.

The percentage rise takes into account foreign exchange and portfolio adjustments.

The company said it had also increased its prices across most of its PU products and regions, with the exception of North America.

Price increases have been most successful for toluene di-isocyanate (TDI) and methyl di-p-phenylene isocyanate (MDI), while polyether polyol prices were below the same period last year.

In the first nine months of this year, PU sales have moved up by 7.6% to around €4.52bn, compared with the same period in 2011.

European TDI contract prices increased significantly over the first five months of this year. Between January and May 2012, prices rocketed by €470-520/tonne, taking values from €1,710-1,780/tonne FD (free delivered) NWE (northwest Europe) to €2,180-2,300/tonne FD NWE, according to ICIS data. This upward price pressure was driven by market tightness and high feedstock costs.

During the rest of the second quarter and through the third quarter, European TDI contract prices remained relatively stable at a high level, supported by firm feedstock trends and a relatively balanced market.

European crude MDI contract prices also trended up during the first four months of 2012, but not as much as for TDI. Between January and April, prices moved up by €160-200/tonne to €2,010-2,150/tonne FD by April 2012. During the rest of the second and third quarters, crude MDI price held firm, supported by relatively balanced market conditions and raw material cost pressure.

While there is some demand softening in the overall downsteam building sector, due to soft macroeconomic conditions and resulting economic constraints, this is being offset to some extent by the stricter legislative drive for thicker insulation to boost energy efficiency, as MDI is a key insulating material.

By contrast, European slabstock conventional flexible polyol prices have fluctuated more during 2012, driven by heightened volatility in the upstream olefin markets, generally good availability and reasonable – albeit fragile – demand for economic reasons.

During the first four months of 2012, European slabstock conventional polyol prices moved up, but then were stable to softer from May to August. Polyol producers said that margins have been eroded – particularly in August 2012, when they were unable to recoup the substantial hike in propylene feedstock costs.

However, buyers were determined to resist increases in August, stating that they had not seen the propylene reduction passed on downstream in July 2012, when propylene dropped significantly, and maintained that demand in northwest Europe was not strong enough to support any further upward price move.

In October, European slabstock conventional polyol prices were assessed at €1,790-1,910/tonne FD NWE. This marks an increase of €80-130/tonne since January 2012.

Despite good PU performance, Bayer’s overall net income fell by 17.8% year on year to €528m in the third quarter of this year, weighed by special charges relating to legal claims and restructuring expenses.

In terms of restructuring and capacity growth, MaterialScience plans to invest €120m to more than double the nameplate capacity for MDI at its Brunsbuettel plant in Germany. In September 2012, the company applied for the permit to extend its MDI capacity at the site, and a regulatory decision is expected to be reached in mid-2013.

Earlier, in February 2012, MaterialScience received a permit for the construction of a new TDI plant in Dormagen, Germany. The company is investing €150m in the new 300,000 tonne/year worldscale TDI  plant, which is expected to replace the company’s existing TDI capacities in Dormagen and Brunsbuettel.

The final operating permit is expected to be granted at the end of 2012. The new TDI capacity plans are driven by underlying growth potential, particularly in the emerging markets.

MaterialScience’s sales in the emerging markets edged up by 2.7% in the first nine months of 2012 to €3.72bn, compared with the same period in 2011. Sales in the third quarter increased by 4.8% to €1.31bn year on year.

The highest growth rates were pinpointed in Latin America, along with healthy sales in eastern Europe and in Asia –particularly in China. Business in the emerging markets accounted for just over 40% of MaterialScience’s sales in the first nine months of 2012, and a slightly higher percentage in the third quarter of 2012.

($1 = €0.78)

By: Heidi Finch
+44 20 8652 3214

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