19 November 2012 16:11 [Source: ICIS news]
LONDON (ICIS)--European methyl ethyl ketone (MEK) distributors are being forced to sell material at a loss in order to shift product as demand drops, sources said on Monday.
Demand in the well-supplied European MEK market has been severely impacted by the on-going macroeconomic downturn, and is unlikely to pick up in December as the eurozone slips back into recession.
MEK prices are starting to show a two-tier pricing system, one level representing producer rates to the market, the second representing the lower distributor re-sell figures.
European MEK producers have been supplying product at €1,310-1,320/tonne ($1,679-1,692/tonne) free delivered (FD) northwest Europe (NWE), but distributors have been selling full truck loads at prices as low as €1,270/tonne FD NWE to generate buying interest.
A distributor described demand as "lousy", adding “demand is particularly low … really bad.”
Distributors are keen to move volumes as quickly as possible, especially when materials are stored in isotainers, which can quickly become expensive when daily demurrage charges accumulate.
A second distributor has put a floor on its prices at €1,285-95/tonne FD NWE, advising buyers they can look elsewhere if they want cheaper MEK.
“Prices customers are asking for are too low, so we stopped selling in order to avoid bigger losses,” the second distributor said.
“Customers fully accepted our stance, but said OK, we'll go to other suppliers,” it added.
In the current buyers’ market, the distributor’s month-to-date demand in November dropped 25-30% compared with the same period in October after adopting this firmer stance to protect profit.
However, producers are struggling to understand why distributors are selling product at a loss, with one producer saying distributors are either being supported by another producer, or they are not selling product at all.
From the consumer side, a buyer said that distributors are choosing "their own path" in the current MEK market, particularly when demand is so subdued.
Demand is not expected to improve in December as the market enters the year-end wind-down period.
($1 = €0.78)
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