Europe crude MDI mostly rolls over in Jan on costs, flat demand

16 January 2013 23:59  [Source: ICIS news]

LONDON (ICIS)--European crude methyl di-p-phenylene isocyanate (MDI) contract prices have largely rolled over into January, with only selective increases as high benzene feedstock costs were weighed against strong buyer resistance amid sluggish demand and good availability, market players said on Wednesday.

Contract prices in January were assessed by ICIS at €2,030-2,150/tonne (€1,523-2,867/tonne) FD (free delivered) WE (west Europe) for crude MDI.

Numbers below the crude MDI range were also reported by a few buyers but there was insufficient market confirmation to substantiate them as a general market level.

Producers had targeted price hikes of €150-200/tonne for MDI for the first quarter of 2013 because of intensified cost pressure over recent months.

However, sellers’ attempts to raise prices across the board for crude MDI in January/the first quarter have largely been thwarted by strong buyer resistance amid flat-to-slow demand and generally good availability.

The prolonged Christmas/New Year holidays, which extended into the first few weeks of January, also made it more difficult for sellers to implement any price increases.

A few sellers conceded they had mainly secured stable prices for crude MDI in January and they had achieved only a limited number of increases of €20-50/tonne.

Any rises were typically for low-end business and incorporated within the existing crude MDI range. There was, however, no other market confirmation to substantiate any general upward price movement.

Producers have been keen to push any crude MDI quarterly contracts to monthly business in the first quarter to allow a chance to increase prices on the need to recoup margins amid high benzene costs.

Buyers, however, strongly resisted this move in a number of cases and secured rollovers, stating that they would stick to their traditional quarterly contracts in line with their longer term downstream commitments.

One buyer said it had been offered only a monthly price, even for its quarterly contract price. Nevertheless, a rollover had been possible due to the fact that benzene spot values are trading below the January benzene contract price - along with soft crude MDI market conditions -  which had provided a counter-argument against possible increases in January.

For pure MDI, January price settlements were mixed between rollovers and price increases, depending on source. Sellers said that it had been easier to implement price increases for pure MDI in January than for crude MDI.

This is because while high feedstock costs applies for both grades, seasonally improving pure demand in the downstream footwear sector helps to support an upward price move for pure MDI in a number of cases, while seasonally subdued crude MDI demand does not have this supporting factor.

Sellers reported increases of €40-50/tonne for pure MDI in January, although they said that in terms of absolute numbers, prices were largely up by €20/tonne and typically at the low-end of the range. The buy side also confirmed rollovers to increases. To reflect the stable to firmer price sentiment,  the pure MDI range in January was assessed at €2,150-2,200/tonne FD WE.

Sellers are already looking to their crude MDI business in February and March, stressing the urgent need to recoup lost margins in view of the high raw material costs over recent months, irrespective of very volatile benzene spot prices. 

A few MDI suppliers said that they are looking for increases of €50-70/tonne in January as a minimum, expected to achieve a total of €150/tonne by the end of the first quarter.

Buying sources, said that they could not rule out the possibility of increases over the next few months, if the upstream benzene contract price remains high and if crude MDI demand in the  main downstream construction sector seasonally picks up.

($1 = €0.75)

By: Heidi Finch
+44 20 8652 3214

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