28 November 2012 23:59 [Source: ICIS news]
LONDON (ICIS)--European adipic acid (ADA) November contract prices have finalised at an increase of €20/tonne ($26/tonne) on average, the majority of producers and consumers confirmed on Wednesday.
In a minority of cases, rollovers and increases of €25/tonne were agreed.
Price rises had to be accepted by consumers because producers’ margins are too low to absorb cost increases without halting production.
“[The November] Benzene [contract price] increased by €34/tonne in November, suppliers are really in trouble,” an ADA producer said.
The upstream November benzene contract price settled at a rise of €34/tonne.
Expectations that the December benzene contract price will also increase added further support for higher ADA contract prices.
ADA producers said they had been hopeful of getting stronger price rises to increase margins, but weak downstream demand had prevented this.
“Of course, much more was needed, but exceptions [were] made on the [approach of the] year-end,” an ADA producer said.
Consumption is low because of year-end destocking to reduce working capital on company balance sheets, coupled with poor macroeconomic conditions.
“At the moment I don't want to make a forecast, but it doesn't feel good. The car producers are shutting partly their plants, so that means volume-wise the market will get under further pressure, depending on what North America is doing. All depends on Asia, at the moment who can really forecast - it's some kind of gambling,” an ADA buyer said.
The downstream polyurethane (PU) market has been the most severely impacted by weak demand, according to sources with 2012 consumption estimated at up to 20% below 2011 levels.
The ADA market remains oversupplied, sources said. Several players are expecting 2013 consumption to be lower than 2012, while others expect a rollover to slight increase, although market conditions are too volatile for firm predictions and will depend on supply, demand, feedstock cost, and macroeconomic factors.
European ADA November contracts finalised at €1,565-1,635/tonne FD (free Delivered) NWE (northwest Europe).
($1 = €0.77)
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