08 February 2013 23:59 [Source: ICIS news]
LONDON (ICIS)--First-quarter methyl methacrylate (MMA) contract prices in Europe have settled at a decrease for the third consecutive quarter, because of poor demand in a competitive market, sources said on Friday.
The range has been assessed at €1,660-1,690/tonne ($2,213-2,253/tonne) on a free delivered (FD) northwest Europe (NWE) basis, €20-30/tonne below the previous range.
Contracts for the quarter fell by €10-50/tonne, with some agreements rolling over, depending on starting point.
“It’s purely a competitive market place,” a producer said. “Demand was slow because it was the start of the year. The market had a longer feel for a short amount of time.”
Concerns regarding the impact of raw material costs on production margins prompted suppliers to target hikes to recover costs.
Negotiations were lengthy as buyers resisted the targeted increases on the back of lacklustre demand, healthy availability and reduced feedstock costs in January.
“We had some tough discussions,” one buyer said. “I tried to be reasonable. They [the producers] are under pressure with feedstock costs, but we have slow demand, lower [feedstock] acetone and propylene prices in January and good availability.”
Downstream, European polymethyl methacrylate (PMMA) first-quarter contract prices came down by €0.10-0.20/kg on weak demand in a well-supplied market.
There is, however, a sense among players that the trend in the MMA market will change in the coming weeks. Factors likely to put upward price pressure on the MMA market include increased construction activity, as slightly warmer weather spreads across Europe in March and April, higher upstream acetone contract and spot prices, tighter availability and firming prices in the propylene market, as well as producers’ ongoing attempts to regain margin lost in 2012.
In addition, Germany's Evonik Industries is expected to undergo a regular maintenance turnaround at its 225,000 tonne/year MMA facility in Worms at the end of March / beginning of April.
Demand is expected to ramp up from all segments as the second quarter approaches.
MMA buyers said they need to wait until demand improves before hikes can be implemented.
“Only when the demand increases will we accept price rises, not when feedstock prices rise. We are squeezed too,” the buyer added.
The producer said: “We are seeing costs going up. Demand was poor because it was January, but it’s picked up dramatically and people are really getting on with it now.”
It added: “February has got a very different feel about it. The cost base is moving, with potential to move significantly higher. Prices are likely to rise in the way the supply/demand balance necessitates.”
The producer said production is going well, adding that its plant is running flat out.
As end-users tend to paint their homes once the winter weather has passed and most opt to undertake DIY activities over long weekends, producers are preparing for the upcoming spring holidays in Europe. “Easter is earlier this year [29 March-1 April], so that makes things start earlier. The people in the coatings sector need material now to make the resins to get product on the shelves for Easter.”
Consumers expect second-quarter demand to pick up. “Hopefully we can sell more during that time,” the buyer said. “We are also struggling with the cost of feedstocks. Turnover results in the construction sector and the steel industry are low. The automotive sector isn’t doing well. People aren’t able to buy what they don't need. We cannot translate these prices,” the buyer said.
The producer said it is too early to give price indications for the second quarter, but added: “It's clear it will be an increase.”
Another producer indicated its pricing intentions for February MMA contracts. “Ideally, we would need at least a €100/tonne increase in February. The next move is up. There's no other way around it.”
Sentiment has not yet firmed in the spot market, where prices are at €1,510-1,550/tonne FD NWE, having fallen by €60-80/tonne since the settlement of the fourth-quarter contract in November 2012.
“For February contract pricing, I expect a rollover maybe,” the buyer said. “We can buy the spot material. If they want to make us pay more, we can buy elsewhere,” it added.
One trader said its demand is not yet picking up. “It’s not bad but it’s not improving. Maybe it’s a bit too early, too cold. There is still snow in parts of Europe, which is impacting demand for product. Demand should pick up in March and April for all acrylates.”
Another trader said it would be looking to offer February cargo at €1,560/tonne FD.
Upstream, the February European acetone MMA contract price was agreed at €895/tonne FD NWE, up by €15/tonne from January on the back of a drop in feedstock propylene.
MMA is an organic compound. This colourless liquid is a monomer produced on a large scale for the production of PMMA, which is often used as a lightweight or shatter-resistant alternative to glass.
($1 = €0.75)
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