Europe December MDI prices roll over on costs, demand

12 December 2012 23:59  [Source: ICIS news]

LONDON (ICIS)--European methyl di-p-phenylene isocyanate (MDI) contract prices have rolled over into December, as intensified upstream benzene cost pressure has been weighed against soft market fundamentals, market players said on Wednesday.

Contract prices in December were assessed steady at €2,030-2,150/tonne ($2,636-2,792/tonne) FD (free delivered) NWE (northwest Europe) for crude MDI and €2,130-2,200/tonne FD NWE for pure MDI, as a result, according to ICIS.

Numbers either side of the ranges were also heard in a few cases, but they were not widely confirmed.

A few crude MDI buyers said that they had tried to negotiate prices lower in December, based on subdued demand for seasonal and economic reasons and good availability. Their attempts had proved unsuccessful because of sellers resistance amid the firming trend for benzene feedstock costs.

Sellers stressed the underlying need to increase MDI prices, because of higher upstream benzene costs and the need to recoup lost margins. However, it was not considered practical to raise prices in December, because a number of MDI contracts, particularly for crude MDI are fixed on a quarterly basis and prices for those accounts will remain stable until the end of December.

They also said it was difficult to increase MDI prices in December because of the shorter working month and quieter holiday period.

Instead, producers are looking for hikes of €150-200/tonne as of the first quarter 2013. They seek margin recovery and believe they will have more opportunity to increase prices, with the re-negotiation of a number of quarterly contracts and a possible restocking effect from January.

Buying sources, however, considered possible price increases in the first quarter of 2013 to be unrealistic from a market perspective. They expect the market to remain soft, because of the low season in the main downstream sectors in the first quarter and a still fragile economy. Price reductions were more appropriate, they said, based on subdued market and economic conditions.

MDI availability is seen to be good, particularly for crude MDI, because of the seasonal slowdown in demand, as well as ongoing economic constraints.

Players said that they had not seen any adverse effects from recent and ongoing MDI production constraints, because they were being mitigated by low downstream demand. 

By contrast, one producer suggested that pure MDI supply is on the short side, although it could not pinpoint if this was due to the production constraints of other sellers or the onset of a seasonal pick-up in pure MDI demand.

Pure MDI in the footwear sector traditionally improves at the end of the year and early part of the new year. This is in contrast to crude MDI, which seasonally pick-ups during the second quarter, in line with expected more favourable weather conditions.

($1 = €0.77)

By: Heidi Finch
+44 20 8652 3214

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