Price and market trends: Europe acrylates players seek price direction from December propylene

29 November 2012 18:47  [Source: ICB]

Players watching the propylene market are expecting a rollover or slight decrease on softening demand

Players in the European acrylic acid (AA) and acrylate esters market are carefully watching developments in upstream propylene costs to gain some price direction ahead of December, sources say.

"We are expecting a lower propylene number in December," said one buyer, adding that it will push for any decrease to be reflected in next month's contracts. "November saw some minor reductions but mostly the numbers rolled over."

Other players confirmed that November numbers had moved up in some cases, but a rollover across all grades was more common.

This was despite the €20/tonne ($26/tonne) reduction on propylene this month, as acrylate producers looked to claw back margins that have been squeezed this year amid soaring upstream costs and tepid end-user demand.

Players watching the propylene market - where December contract discussions were set to commence in late November - are expecting a rollover or slight decrease on softening demand, with some continued stability in the market said to be the main priority.

While AA and esters activity is slowing ahead of year-end, and end-users look to minimise inventory levels, one producer does not expect a significant drop in values in a repeat of the fourth quarter of 2011, when softening demand and aggressive spot offers from Chinese and Russian players saw domestic values decline.

"It isn't evident that we will see a large scale destocking this year," said one major European supplier. "It is not the same dynamics as last year, thankfully."

But other sources believe key end-use markets such as construction winding down in the fourth quarter will lead to lower pricing.

While some concerns about availability have been voiced following the explosion at Japanese company Nippon Shokubai's Himeji facility in September, which resulted in the company's AA and super absorbent polymer facilities shutting down, there is so far no consequent major impact on European supply and demand levels.

Additionally, BASF's 270,000 tonne/year AA facility in Ludwigshafen, Germany, is said to be experiencing production problems, although there has been no confirmation from the Germany-based chemical major.

Despite this, sources do not anticipate any sizable impact on the European supply and demand dynamic, as offtake is seasonably slower.

"There have been no interruptions on supply, as it's the low season," one buyer explained. "It is fairly manageable. When the market picks up next year we could see some impact from the Nippon [Shokubai] situation towards the end of [the first quarter] and in early [the second quarter]."

By: Truong Mellor
+44 208 652 3214

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