Europe adipic acid Feb contracts up €20/tonne on margin recovery

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

LONDON (ICIS)--European adipic acid (ADA) February contract prices have settled at a weighted average of plus €20/tonne ($26/tonne), although settlements fell within a wide range, buyers and sellers said on Wednesday.

Price increases were because of producers’ need to recover margins against benzene.

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.

One producer said that it had achieved price increases of €60-70/tonne, but this was not seen as representative by the majority.

Some buyers said that they had agreed freely-negotiated February contracts at a fall of €20/tonne, because of their own need to restore margins, coupled with oversupply in the market. They added that the €113/tonne fall in the February benzene contract compared with January added support to their argument.

Attention has already turned to March contracts, with some producers saying that they need to achieve an additional €200/tonne increase in margins with benzene, and that they will target this on a step-by-step basis.

“It's not enough because we must recover more. The economics for adipic are still a disaster, but better than Jan. In theory we'd need a €200/tonne increase. Of course you can't recover that in one month - we have to try to recover step-by-step,” an adipic acid producer said.

Demand is increasing because of the approach of the peak textiles season in March. Nevertheless, several sources said that  the market remains structurally oversupplied.

Upstream, despite the immediate bearishness in the European benzene market, the current weakness on 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 (cost, insurance and freight) ARA (Amsterdam-Rotterdam-Antwerp) 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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