Europe ADA players do not expect price falls in March

06 March 2013 17:29  [Source: ICIS news]

LONDON (ICIS)--European adipic acid (ADA) sources are not expecting any reduction in March contract prices because of the €14/tonne ($18/tonne) increase in upstream benzene and the need for producers to maintain margins, sources said on Wednesday.

The majority of producers and buyers are yet to set firm price targets, but producers are targeting rises beyond the benzene increase because of the need to restore profitability, which has been under pressure since mid-2011.

Several said they were aiming for a rise of €30/tonne.

Between July 2011 to February 2013, upstream benzene prices rose by 286/tonne. In the same period, ADA contract prices fell by 175-205/tonne.

Several buyers said that they are aiming to limit any price rise to €10/tonne – broadly inline with the benzene increase – arguing that demand is too weak to support further increases beyond raw material costs, particularly given that the €113/tonne fall in the February benzene price was pocketed by ADA producers.

One buyer said that it had already agreed its March contract prices at this level.

Views on demand are mixed. Some sources said that consumption is increasing because of the approach of the peak season – albeit from a low base. Other sources said that demand remains weak because of poor macroeconomic conditions which have reduced consumer purchasing power.

They added that because of continued uncertainty in the general economy, they are not expecting a peak-season in ADA demand this year.

The majority of players said that it is too early to gauge consumption levels in March.

Players seeing an increase in consumption said that this may not be underlying demand, but buyers trying to cover shortages in the market resulting from production outages globally.

“[We’re] seeing tightness because of these outages despite structural shortfall. March they [buyers] feel sufficiently under pressure to accept an increase on the price,” an ADA producer said.

BASF halted production at one of its ADA lines in Ludwigshafen, Germany, for maintenance, a company source previously confirmed.

The maintenance shutdown will take off line approximately 25% of the plants nameplate capacity of 260,000 tonnes/year. The line will be brought back on stream in June. There was no update on the production situation this week.

China’s Shandong Haili Chemical Industry is keeping its 150,000 tonne/year ADA plant in Jiangsu province off line, because of a power outage, a company source said on 6 March.

The plant was shut on 2-3 March, the source said, adding that the plant is expected to be restarted soon.

There were also rumours of production problems in the US, but these were not widely confirmed.

Overseas production outages have reduced import volumes into Europe and increased export demand.

Although some European sources said that the outages were not enough to overcome the 130,000 tonne/year estimated oversupply in the market, other players said that supply in the short-term is likely to be tight.

$1 = €0.77)

By: Mark Victory
+44 208 652 3214

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