15 February 2013 09:43 [Source: ICB]
European methyl di-p-phenylene isocyanate (MDI) contract prices have been agreed stable to firmer in February, depending on grade and source, as cost pressure was weighed against differing market fundamentals, market players said on 6 February.
Polyurethane, used in freezers, is a major application of MDI
For pure MDI, prices were generally reported firmer in February, supported by high upstream costs, seasonally healthy demand in the downstream footwear sector and balanced-to-tight supply.
There was some consensus among buyers and sellers for increases of €20/tonne ($27/tonne) for pure MDI in February, and to reflect this the range has been changed to €2,170-2,220/tonne FD (free delivered) WE (western Europe), according to ICIS. Numbers either side of the pure MDI range were also heard, but they were not widely confirmed.
Larger price hikes of €40-100/tonne for pure MDI in February were reported by some producers, but there was insufficient market confirmation to substantiate this. By contrast, one buyer reported a rollover in its pure MDI price for February, with increases of €50/tonne postponed until March. Its stable price in February was seen to be an exception rather than the norm, however.
BUYERS RESIST INCREASES
For crude MDI, sellers reported a mix of rollovers and average increases of €30-50/tonne. One main producer reported mainly rollovers in February, stating that any slight upward adjustments were selective amid strong buyer resistance and unfavourable market conditions. Any increases were included within the existing range.
Other producers, by contrast, reported average increases of €30-50/tonne for their monthly business and pegged the range higher, but there was insufficient market confirmation to support this.
Buyers confirmed mainly rollovers for crude MDI in February, and an increase of €25/tonne on one occasion. Crude MDI buyers strongly resisted any general upward price move in February, stating that downstream demand from the construction sector was seasonally low - and in some cases economically subdued - and availability remains good, which did not justify any upward price move.
The crude MDI range remains steady at €2,030-2,150/tonne FD, with any higher prices largely incorporated within the range.
Numbers below the crude MDI range were heard in a few cases, but this was not widely confirmed. In addition, one producer pegged the range €30/tonne higher on average, but there was insufficient market confirmation to corroborate this. A number of crude MDI contracts are fixed for the quarter, which means that these prices have rolled over into February.
News of the €113/tonne drop in the upstream benzene contract price in February came too late to have any impact on monthly MDI price talks in February.
Sellers maintain that margin recovery is still necessary, following several months of high upstream costs, stating that the price reduction in February is not sufficient to compensate for upstream increases over recent months.
Two producers said they would re-target previous hikes - originally for the first quarter, as of 1 April - with the re-negotiation of quarterly contracts.
Some crude MDI buyers said that the drop in upstream benzene contract prices has brought some relief to MDI margins, but they said it is too early to see if they will have any impact on forthcoming price discussions, depending on how benzene costs and demand pan out over the next few weeks.
For pure MDI, one buyer said said it would expect to see some reduction in its pure MDI prices in March in view of some relief in feedstock costs. However, a seller said that there was no room for any reductions for pure MDI, and that it would still look to increase prices further based on seasonally healthy demand and the ongoing need for margin recovery.
SEASONAL DEMAND FLOW
Crude MDI demand in the main downstream construction sector remains reduced because of low seasonality, with any seasonal uptick in demand not expected until the spring, depending on economic developments. Aside from seasonality, ongoing economic constraints continue to dampen activity, particularly in the Mediterranean and eastern Europe.
Availability for crude MDI remains good with no reports of any supply problems, despite output constraints at one main plant in northwest Europe and forthcoming upstream and MDI plant turnarounds for two suppliers.
In production news, operating rates at Dow Chemical's MDI facility at Stade, in Germany remain reduced since the fourth quarter of 2012 for technical and upstream reasons. Previous reports suggested that output is likely to be reduced at the Stade MDI unit for the next few months until associated upstream maintenance takes place at another site, which normally feeds the Stade facility.
Planned maintenance is expected to take place at the main MDI operations of another supplier in northwest Europe in the second half of March, and last for three to four weeks.
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