25 January 2013 23:59 [Source: ICIS news]
LONDON (ICIS)--January European methyl methacrylate (MMA) contract prices fell by €10/tonne ($13/tonne), on soft demand in a well-supplied market, sources said on Friday.
The fourth consecutive monthly decrease puts January MMA at €1,680-1,690/tonne FD (free delivered) NWE (northwest Europe).
Buyers also attribute the downtrend to lower January feedstock costs for propylene, down by €13/tonne - and acetone, lower by €10/tonne - but sellers said that despite recent movements, including the €30/tonne rise in raw material methanol, upstream costs remain high.
Demand is seasonally low in the first quarter, and consumer confidence has been lacking amid economic uncertainty.
However, producers said January volumes are better than had been expected, adding that concerns lie with margins.
“Volumes are pretty satisfactory given the general state of the economy,” one supplier said. “The big issue is the margins and it has been so for quite some time. We are seeing no relief on the raw materials. The small reduction in acetone is exactly compensated by [the rise in] methanol.”
One producer confirmed it had settled its January contracts largely with rollovers and small decreases.
“Demand is not that great,” a buyer said. “Propylene went down, acetone went down, and customers are not paying more for material because demand is bad.” Buyers said January contracts had rolled over in some cases and gone down by up to €50/tonne.
The buyer went on to say that last year's demand at the same time was about 10% higher. “Discussions are tough for both parties. The outlook for 2013 looks bleak.”
Talk is turning to February, where there is some expectation that price increases will be targeted by producers. Players are keeping a close eye on the cost and availability of acetone in Europe and in the US. Acetone spot prices are moving up on short supply caused by cutbacks in primary product phenol.
“If acetone moves up in February and March, we are possibly stuck with historically-high production costs,” the first supplier said. “We won't have an idea yet until propylene and acetone are settled for February.”
While producers said confidence seems to be improving, and think it is likely the market will firm up a bit as the quarter progresses, participants said it is not yet clear how the next couple of months will play out.
“December wasn't representative because people were destocking. January wasn't representative because people were restocking. February will be better ... I hope,” the supplier said.
Price negotiations are proving tough. “These are testing times for everybody,” another producer said.
($1 = €0.75)
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