22 January 2013 13:38 [Source: ICIS news]
By Matt Tudball
LONDON (ICIS)--European demand for the solvents methyl ethyl ketone (MEK) and methyl isobutyl ketone (MIBK) has weakened during January, while demand for isopropanol (IPA) remains stable at best, supported only by current bad weather conditions in parts of the region.
MEK players have watched demand, and prices, drop on an almost weekly basis since the beginning of the year because oversupply has turned Europe into a buyers’ market.
Spot prices for MEK have fallen €30-60/tonne ($40-80/tonne) since the beginning of January as distributors compete with both producers and each other in order to attract and retain customers in an oversupplied marketplace.
“[MEK demand has been] on a downward slop for some months already…demand isn't really there, and there is enough [product] in the market,” an MEK distributor said.
“Prices are going down because of competition within the market”, another MEK distributor said.
Distributors are having to lower prices to attract buyers, who have a wide selection of sources to purchase from.
Producers are also dropping prices for MEK, but not to the same extent as distributors, believing lower prices will not necessarily stimulate demand.
“We have adjusted prices a bit, not too much…as prices won't drive change [in demand],” a major MEK producer said.
With fewer buyers in the market because weak macro-economic conditions continue to erode end-use market purchasing confidence, players are struggling to sell full truck loads at current prices.
“We tried to reach €1,200-1,220/tonne [free delivered (FD) northwest Europe (NWE)], but demand is not there,” a distributor said.
Players are looking to the end of the first quarter, which typically signals the beginning of construction activity across Europe. A large part of MEK demand comes from the paints and coatings sector, closely linked to the construction industry.
However, with the construction and automotive industries, both users of solvents, still suffering from downturns in 2012, it is unclear exactly how much MEK demand can be derived from these sectors in 2013.
Demand for MIBK is even lower, with very few full truck loads of product being sold in the European market since the beginning of the month.
“There is no interest at the moment. If demand does pick up, it won't be till March,” a distributor said.
MIBK is used extensively in the automotive sector in the production of car tyres, a sector which has been heavily impacted by the bad economic climate across Europe.
While distributors have lowered prices in an attempt to stimulate demand, producers have kept prices relatively stable during January, using feedstock acetone movement, rather than demand levels, to determine price direction.
“We have adjust prices in line with feedstocks, which are not moving,” a producer said, adding that it looks at the longer-term acetone price movement, rather than the week-on-week spot.
It is not all bad news in the European solvents market, however.
Demand for technical grade IPA has seen a slight upturn towards the end of January in the screen wash and de-icer sectors because of bad weather conditions across Europe.
IPA is used in a variety of different end-use applications, not all of which have seen demand rise.
Despite overall subdued demand, IPA producers have tried to implement price increases in January in order to recoup lost margins which were heavily squeezed during the fourth quarter of 2012.
“With both distributors and end users alike, we have managed to at least achieve a minimum €20-30/tonne increase,” a producer said.
Even though feedstock propylene dropped €13/tonne in January, producers have managed to move prices up without too much resistance.
“No one has said it [price increases] doesn't make sense all together. Margins were low so [prices] needed to be adjusted upwards”, a second producer said.
Nevertheless, distributors did face some resistance for end-use consumers when trying to pass on increases.
A distributor said “We are not 100% sure if end users will pay [higher prices] for it [IPA]… demand is still kind of slow, not really booming at the moment.”
The precise reasons for lower-than-expected levels of demand across all three products is not exactly clear, though a number of players think consumers are just being cautious and trying to use up existing stock levels before making further purchases.
Consumers may also be waiting until a better picture of feedstock price movements for February emerges before buying more stock, particularly in the IPA market, where a further drop, or rollover in propylene, will give consumers more reason to reject price increases.
However, any rise in feedstock will strengthen IPA producers’ arguments for putting prices up, possibly causing demand to rise as end-users scramble to purchase product at lower prices.
($1 = €0.75)
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