Europe BPA, derivatives outlook unclear ahead of contract talks

27 November 2012 15:05  [Source: ICIS news]

LONDON (ICIS)--Contract negotiations in the bisphenol A (BPA) and its derivative markets have not yet begun, but most market participants expect prices will roll over because of weak demand, sources said on Tuesday.

November BPA freely negotiated contracts are at €1,550-1,590/tonne ($2,012-2,064/tonne) FD (free delivered) NWE (northwest Europe). Liquid epoxy resin (LER) contract prices are at €2,590-2,650/tonne FD NWE.

As polycarbonate (PC) contracts are quarterly, prices in December will not change but producers are targeting increases of €0.20-0.23/kg for the first quarter. The PC industry is the largest consumer of BPA.

Most PC players agreed that increases will only be possible in the first quarter next year, but even then only by about €0.05/kg because demand is poor and the market is oversupplied.

As yet it is unclear what direction feedstock costs will take, but there are expectations that they will decline slightly. This could trigger a price drop downstream, but producers said they will not reduce prices and keep the difference to improve margins.

Buyers in the LER market said that they will ask for small reductions based on poor demand and the potential feedstock drops.

Sellers said they will not reduce prices because it is unlikely it would stimulate demand as December is a short month for business and most buyers will shut down for maintenance around the 20-21 of December for 2-3 weeks.

"It would be fantastic [for producers] if they could really use this argument, but in my opinion if they are faced with a buyer that is offering to take volumes at a lower price, they will give in," a buyer said.

One eastern European epoxy resins producer said most of its customers will shut down for at least three weeks, so it saw no point in reducing prices as its customers would not buy more product anyway.

"December is going to be really quiet as Christmas is coming and my customers are shutting down," the producer said.

BPA spot prices increased last week by €70-80/tonne on tight availability, but sources expect this will only last a few weeks before things return to normal.

Availability in the LER market is described as long, and demand is poor. Some expect demand will pick up in January because of restocking, but there were quite a few sources that thought nothing will change and January will be as quiet as December.

"I am just going to wait and see what happens and go with the flow because now nothing is as usual and making forecasts has become very difficult," a buyer in southern Europe said.

($1 = €0.77)

Follow Janos Gal on Twitter @janosgalICIS

By: Janos Gal
+44 208 652 3214

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