Price and market trends: Europe PMMA producers face margin squeeze

22 February 2013 10:22  [Source: ICB]

Producers are concerned that price increases will hurt demand while raw material costs rise

European polymethyl methacrylate (PMMA) margins are unsustainable and prices need to increase but weak demand remains a concern, producers said.

High raw material costs, coupled with falling market prices, are impacting margins. Prices have been on a downtrend since the second quarter of 2012 as poor macroeconomic conditions have hampered consumer confidence.

However, there is some concern that price hikes could negatively impact demand and producers may have to accept a rollover in the second quarter.

PMMA was priced at €2.00-2.30/kg ($2.70-3.11/kg) FD (free delivered) NWE (northwest Europe), although material is also being offered at €1.90/kg FD NWE, as of 15 February.

One producer said: "We have a problem with our raw material costs Demand is not bad, but it's not strong. There is no other choice but to increase prices, but will this impact demand?"

Another producer said: "Visibility is poor. Raw material costs are squeezing our margins, and we need an increase to recover that. If weak demand continues, it means that will be very difficult. So we may be forced to accept a rollover unless there is some pick-up in the overall market demand."

The first producer, however, said there are some indications that the outlook is more positive, It said it is now getting more enquiries for PMMA sheet material.

The producer said: "I f we look to the European economy, there are some indications which are more positive than last year. I hope to see a better spring than last year. There is still economic weakness in Europe, but even Spain and Italy are showing signs of recovery. We are more positive than negative. Whether we are right or not, we will see in the next few months."

"It just feels like we're in a trough," the second producer said. "Eighteen months ago we had shortages and strong demand - we had a real peak. Now competitors are offering low prices which are at unsustainable margins. Imports from Asia are no longer as necessary, because buyers can get the material from Europe without longer lead times. It has to change. Something has to give. The market is just not at a place which is going to attract any investment."

The producer believes it was a short term dip, however, and said it expects the market to stabilise.

Feedstock methyl methacrylate (MMA) prices are under upward pressure, and producers are keen to improve squeezed margins.

Demand from the construction sector is expected to pick up in March and April, and that is likely to support producers' attempts at price rises, as are ongoing high upstream costs for acetone, propylene and methanol.

One MMA producer said: "Ideally, we would need at least a €100/tonne increase in February. The next move is up. There's no other way around it."

An MMA buyer said: "Only when the demand increases will we accept price rises - not when feedstock prices rise. We are squeezed, too."

By: Helena Strathearn
+44 208 652 3214

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