Europe Q1 MA contracts largely settle with rollovers, €40/t rises

08 February 2013 23:59  [Source: ICIS news]

LONDON (ICIS)--European liquid maleic anhydride (MA) contract prices have largely settled with rollovers and increases of €40/tonne in the first quarter, as high upstream costs and the need for margin recovery is weighed against reasonable, albeit seasonally lower, demand, market players said on Friday.

European liquid MA contract prices were assessed at €1,710-1,760/tonne ($2,280-2,347/tonne) FD (free delivered) NWE (northwest Europe), according to ICIS. This represents an increase of €40/tonne for low-end business and a rollover at the upper end of the range.

ICIS assessed contract prices are pre-discounted and subject to average discounts of up to around 10%. Slightly larger discounts were also heard from one player, but this was not widely confirmed by others.

Numbers around €1,500-1,550/tonne FD for MA contracts in the first quarter are also reported in some cases, but these were seen to reflect discounted rather than pre-discounted levels.

A few producers pegged the range higher at the low-to-mid €1,700s/tonne FD as a minimum, with values up to €1,800-1,830/tonne FD NWE. However, the highest levels were not confirmed by other players.

Sellers had been determined to increase MA contract prices in the first quarter, supported by high upstream costs for n-butane and benzene over recent months, which has eroded margins and needed to be addressed.

Sellers attempts to increase MA prices significantly in the first quarter, however, were largely met with strong buyer resistance, as customers said that while costs are high, demand in the main downstream unsaturated polyester resin (UPR) sector remained modest for seasonal and economic reasons, while contractual supply remained sufficient.

A few producers said they had secured increases of €30-50/tonne, although one supplier in the Mediterranean had conceded that it had proved difficult to implement increases of €50/tonne. By contrast, larger price hikes of €75-100/tonne were reported by one producer. However, there was insufficient market confirmation to substantiate this.

In contrast, buyers confirmed largely rollovers, although increases of up to €40/tonne were also reported. One customer said it had accepted mainly stable prices but had secured a price reduction from one supplier, to bring its price into alignment with its other suppliers, and therefore this move was more an exception rather than the norm.

MA demand is reasonable in most cases, albeit seasonally reduced in the main unsaturated polyester resin sector, as expected for the time of year. A seasonal uptick in demand in the UPR sector is likely to take place over the next few months, although this will also depend on how the economy pans out. Demand in the Mediterranean, however, continues to be sluggish as it has been most affected by poor macroeconomic conditions.

A few sellers, however, maintain that demand is good, which they attribute to some supply limitations for both domestic and imported product, as well as a slightly more positive economic sentiment in northwest Europe.

The MA market is described as balanced to tight, although with flake seen to be tighter than for liquid. The dearth of imports is limiting flake supply the most because it is structurally reliant on import volumes to supplement the domestic market. Reasonable demand and MA output constraints in some cases also means that general MA availability for both liquid and solid grades is sufficient for contract volumes, but with less availability for prompt.

($1 = €0.75)

By: Heidi Finch
+44 20 8652 3214

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