01 March 2013 09:07 [Source: ICB]
Price direction for March is still unclear. Meanwhile, all eyes are on the March ethylene contract
European ethyl acetate (etac) spot prices were stable in the week ending 22 February after rising earlier in February but suppliers disagree on March price direction, industry sources said.
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 as domestic downstream demand remains fragile.
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 (free delivered) NWE (northwest Europe) to low €900s/tonne the week ended 22 February.
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. The etac price was assessed at €890-930/tonne FD NWE on 22 February.
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 dampener 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 remain 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.
Players said they are waiting to understand how supply will develop. Many are discussing the potential impact of the start up of Saudi International Petrochemical Company (Sipchem)'s 100,000 tonne/year etac/butyl acetate (butac) plant in Saudi Arabia.
The company is expected to start production at its upcoming etac facility in Jubail on 15 April.
Additional reporting by Trisha Huang and Heidi Finch
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