22 February 2013 17:20 [Source: ICIS news]
By Cuckoo James
LONDON (ICIS)--European ethyl acetate (etac) spot prices are stable this week after rising earlier in the month but suppliers disagree on March price direction, industry sources said on Friday.
Some suppliers maintain March prices would be driven by a potential for increases in upstream ethylene and ethanol price hikes, while others continue to stress the role played by competition between suppliers for market share.
All eyes are on the European March ethylene contract settlement. Ethylene sellers are expected to push for sizeable price hikes of €50-100/tonne because of the increase in naphtha costs over the last month and to recover margins, but buyers say they will struggle to accept anything more than a modest increase at most as downstream demand remains fragile domestically.
A local etac producer said it expects etac prices to stay stable in March even if the March ethylene contract price settles higher, adding that it was still selling etac in the high €800s/tonne FD (fre delivered) NWE (northwest Europe) to low €900s/tonne this week.
A second European producer said it is selling etac to distributors at €880-890/tonne FCA (free carrier), while an importing producer from South Africa said it was selling at €930-940/tonne FD NWE.
Etac price was assessed at €890-930/tonne FD NWE on Friday.
Meanwhile, an importing producer from India said deals in Europe were no longer being concluded at the above range. It said it was selling etac at €890/tonne FCA.
The appreciation of the Indian rupee in recent weeks, together with a potential increase in the cost of feedstock ethanol in India in March, has contributed to Indian producers' firmer selling targets.
Etac supply in Europe is structurally short as it is limited to one major local producer, and consequently attracts regular imports from India, Brazil, South Africa and Mexico. Competition between local and importing producers is immense, and acts as a damper on price hikes.
In 2012, sharp price movements in upstream ethylene - utilised by a major local producer for etac production - had very little impact on etac pricing, some industry sources pointed out, primarily because of stiff competition among suppliers for market share.
The first European etac producer said it expected etac demand to be stable from February to March, and added that it did not have the luxury to move up prices as a result of the flat demand and the stiff competition for etac market share.
With demand expected to be stable, a more important factor determining prices would be the degree of supply in the market, a distributor said.
Supply and production at local producers continue to be healthy. However, there is uncertainty regarding the level of imports that would be exported from India to Europe in the near future as feedstock ethanol - used by etac producers in India instead of ethylene - availability in India remains uncertain.
However, the distributor added that imports from India will not be under threat immediately, and product flow would continue to be normal at least until March.
Other market players said they are waiting and watching to understand how supply will pan out in the coming weeks. Many in the market are discussing the potential impact of the start up of Saudi International Petrochemical Company (Sipchem)'s 100,000 tonnes/year etac/butyl acetate (butac) plant in Saudi Arabia.
The company is expected to commence production at its upcoming etac facility in Jubail on 15 April.
Opinions vary on the impact the Saudi plant might have in Europe, with some saying the company could add to the stiff competition for etac market share in Europe, while others said it would have minimal impact in the long term as product might be diverted elsewhere.
Additiona reporting by Trisha Huang, Heidi Finch
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