Europe ADA demand being driven by US, Asia exports

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

LONDON (ICIS)--European adipic acid (ADA) consumption is being driven by exports to the US and Asia, several sources said on Wednesday.

“For March I see quite a high demand and enquiries from the US... The euro firming of course helps...  [there’s] a lot of demand, but mostly from overseas. Europe is stable,” a producer said

Exporters said that Asian buying interest is rising because of restocking following the Lunar New Year holiday.

“There are some signals that something is rebounding a little bit. In Asia, they just came back... We expect usually after Chinese New Year an increase in demand,” another producer said.

This was not confirmed by domestic sources in Asia, who said that it will still take a week or two for downstream businesses to fully recover, as some migrant workers will come back only after the Lantern Festival, which falls on 24 February.  

Nevertheless, spot prices in the region for material originating in China and the Ukraine rose by $30/tonne (€22.50/tonne) at the low end, to $1,780-1,820/tonne, on lower availability in China – where operating rates at major plants have been reduced to 50-70% of capacity because of poor margins. Lead times for exports to Asia are typically four-to-six weeks.

Buying interest in the US is increasing, due to high feedstock benzene costs and a strengthening euro against the US dollar, which have made European prices competitive. There were also rumours that there are production problems in the US, but these could not be confirmed at source.

As a result of buying interest overseas, European producers are targeting March spot prices of €1,550/tonne FD Europe, sources said, an increase of €150/tonne from mid-January. Spot volumes are currently on offer at €1,500-1,520/tonne, sources said.

“We went from less than €1,400/tonne to €1,450-1,460/tonne for spot material. Now we can see €1,500/tonne but according to what we believe and understand, the requests will be higher in March - we heard €1,500-1,520/tonne but we know that the idea of the producer is to arrive at €1,550/tonne,” an ADA trader said.

European adipic acid (ADA) February contract negotiations are ongoing and buyers and sellers remain far apart.

Producers continue to target increases of up to €70/tonne to restore margins lost against upstream benzene in the past 18 months. Buyers are targeting decreases of up to €20/tonne because of the €113/tonne fall in the upstream benzene contract price. Although consumers accept that margins are weak throughout the polyamide chain, they add that their own downstream margins and demand will not support price increases.

“We're currently discussing pricing. Obviously benzene's come down, so we'd like to see [ADA] prices coming down, but suppliers saying okay but we haven't recovered the entire [benzene] increase [from last year]. Plus €70/tonne seems a little bit high, plus €45/tonne maybe. We're targeting a decrease, I'd be happy with minus €20/tonne,” a buyer saud

Between July 2011 and January 2013, ADA contract prices have fallen €195-225/tonne. During the period from July 2011 to February 2013, upstream benzene prices have increased by €286/tonne.

($1 = €0.75)

By: Mark Victory
+44 208 652 3214

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