Europe ACN spot activity low on uncertainty, buy/sell divide

01 March 2013 23:59  [Source: ICIS news]

LONDON (ICIS)--European acrylonitrile (ACN) spot players have moved to the sidelines of the market because of a gulf between buyers and sellers’ positions, coupled with uncertainty over the evolution of prices caused by volatile exchange rates, rising production costs and fragmented demand, they said on Friday.

A single deal for 2,000 tonnes was done this week at $1,975/tonne (€1,521/tonne) CIF (cost, insurance and freight) W (western) Europe for March delivery, but this deal may have had special conditions attached, sources said.

Bids and offers remain within a wide-range of $1,900-2,050/tonne, but the majority of price ideas remained within the previous week's price range of $1,920-1,995/tonne.

There are concerns the €55/tonne increase in the upstream propylene cost will limit demand because of poor downstream markets, sources added.

The market predicted to be the most heavily affected by players is the downstream fibre industry.

Acrylic fibre producers said that with fibre prices currently around $2,500/tonne CIF Europe, they would need ACN spot prices as low as $1,900/tonne CIF W Europe in order to reach a workable margin.

Nevertheless, producers argue they need spot prices of at least $2,000/tonne CIF W Europe to break even at current production costs, and are targeting prices of $2,050/tonne.

Weak margins and rising costs for producers have helped push spot prices 17-19% higher in the past 13 weeks.

The divide between buyers and sellers has caused a stalemate in the market, which is becoming increasingly illiquid.

The majority of players in Europe see demand as weak because poor macroeconomic conditions have reduced consumer purchasing power. Downstream automotive and fibre end-use consumption is low, and the majority of players have not seen an increase in exports following the Lunar New Year holidays or the approach of the peak season, as had been expected.

Anticipation of lower US propylene prices in March contracts and volatile exchange rates has led overseas buyers to move to the sidelines to avoid the risk of a moving cost base.

Several players feel downstream demand is so low that ACN spot prices will have no impact on demand. This is making some sellers more entrenched in their price positions.

Coupled with this, some fibre producers are choosing to maintain high operating rates despite poor margins because of the cost of turning down plants.

Views on ACN demand were not unanimous and some sellers and buyers said downstream demand is healthy.

($1 = €0.77)

By: Mark Victory
+44 208 652 3214

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