BASF adipic acid outage make March ADA price fall unlikely - sources

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

LONDON (ICIS)--Maintenance on one of BASF’s adipic acid (ADA) lines in Ludwigshafen will make a fall in March contract prices unlikely, sources said on Wednesday.

European ADA players said that the outage will help producers to reduce structural oversupply in the market, and would make a fall in the March contract price increasingly unlikely.

The maintenance will take offline approximately 25% of the BASF plant’s nameplate capacity of 260,000 tonnes/year. The line will be brought back onstream in June, a company source confirmed on Tuesday.

The turnaround was originally scheduled for the third quarter, but has been brought forward because of poor ADA margins, the source said.

Several European ADA producers said that they had already received requests for additional material to cover volumes.

The European ADA market is oversupplied by up to 130,000 tonnes/year and in need of consolidation, sources said. This is because additional production capacity in Asia has meant that the region is increasingly relying on domestic supply, at the expense of importing material.

Views on the actual level of oversupply ranged from 80,000-130,000 tonnes/year, depending on operating rate estimates. There have been no announcements of plans to idle European adipic acid production.

Some producers saying that they need to achieve an additional €200/tonne ($260/tonne) increase in margins with benzene, and that they will target this on a step-by-step basis.

Demand is increasing because of the approach of the peak textiles season in March.

One producer said that increased demand and the BASF outage had led to a “unique opportunity” to achieve price targets in March.

Some buyers, however, said that although the BASF outage will provide psychological support to producers’ bids to recover margins, the lost capacity would not be enough to counterbalance the oversupply in the market.

“[The BASF outage] means we’re probably 50,000-60,000 tonnes/year still oversupplied. I'm sure the announcement will help - a really big impact not too sure,” a buyer said.

Between July 2011 and February 2013, ADA contract prices fell by €175-205/tonne. During the period from July 2011 to February 2013, upstream benzene prices increased by €286/tonne.

Upstream, despite the immediate bearishness in the European benzene market, the current weakness of the euro means that the likely reduction in US dollar terms will still produce an increase in the euro figure.

March spot benzene has traded at $1,375-1,390/tonne CIF ARA this week, down from the February contract price of $1,408/tonne. However, even a settlement at $1,375/tonne would mean a €19/tonne increase from the February number in euro terms, using the current exchange rate.

Additional reporting by Truong Mellor

($1 = €0.77)

By: Mark Victory
+44 208 652 3214

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