Volatile market conditions reduce interest in Europe ACN exports

28 February 2013 17:17  [Source: ICIS news]

LONDON (ICIS)--European acrylonitrile (ACN) demand for spot exports has stalled because of volatile exchange rates and expectations that US propylene contract prices could fall in March, exporters said on Thursday.

“Exchange rates, is killing things, they don't want any product at risk of high costs,” a European producer said.

The euro to US dollar exchange rate has become increasingly volatile since the start of 2013.

This is a problem for ACN spot sellers because ACN spot prices are sold on a US dollar basis, but production costs are in euros, creating a fluctuating spread between the two.

On top of this, exports of finished goods such as acrylonitrile-butadiene-styrene (ABS) and acrylic fibres are priced in euros, meaning that overseas buyers are unwilling to take deliveries – which typically have lead times of up to eight weeks to Asia – amid uncertainty over the true cost when material lands as a result of volatile exchange rates.

“In one day it [the euro:US dollar exchange rate] can change 3-4 cents. It makes players more reluctant to buy,” and ACN buyer said.

Although some sources said that they factor in exchange rate movements, and hedge against them, volatility has risen sharply in 2013.

“Currency is one of our problems in the past year. We factor it in - I think it's something we have to get used to it. I don't think it's going away. If you don't have hedging in place, it's of course a concern,” an ACN buyer said.

Asia is a major export market for European ACN and European finished goods. Traditionally, Europe ACN exports would rise following the end of the Lunar New Year holiday in Asia, as Asian players look to restock material. Nevertheless, players are yet to see a rise in exports so far in 2013.

Coupled with exchange rate volatility, expectations that US propylene prices could fall substantially when March contracts finalise – based on prevailing propylene spot prices in the US – has caused some overseas buyers to move to the sidelines of the market in anticipation.

“Feedstock [contract price] in US is coming off - otherwise it would be different. Exchange rate volatility is not the only factor, but also the situation of your own country - that plays a role. People cautious because the season's not there and if they see feedstock becomes cheaper next month - why would they buy now? Only someone that's fully empty will buy,” a trader said.

In recent months, high propylene costs in the US compared with Europe had been supporting European exports of ACN to the region. The European March propylene contract price increased by €55/tonne ($72/tonne) compared with February, narrowing the price gap between the two regions.

($1 = €0.76)

By: Mark Victory
+44 208 652 3214

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