15 March 2013 09:26 [Source: ICB]
Demand is down as much as 30% from year-ago levels as consumers feel the pinch
Several European acrylic fibre producers have estimated first-quarter demand is up to 30% lower year on year because of poor macroeconomic conditions.
"Q1 30% down year-on-year is more-or-less what I'm thinking," an acrylic fibre producer confirmed.
The main cause of the fall in demand is negative general economic conditions, which have reduced consumer purchasing power.
However, other factors such as poor margins against acrylonitrile (ACN) as well as volatile exchange rates are also limiting demand.
"ACN pricing is far too high - fibre producers can't pass on cost-prices," an ACN trader said. "It's globally still a crisis. I think that also markets not doing fantastic."
Acrylic fibre producers argue that acrylic fibre prices need to be at least $600/tonne (€456/tonne) above ACN spot prices. With acrylic fibre spot prices currently at around $2,500/tonne CIF (cost, insurance and freight) Europe, this would necessitate an ACN spot price of $1,900/tonne.
However, ACN producers argue that their own feedstock costs demand a minimum ACN spot price of $2,000/tonne.
Activity in the ACN spot market has been limited in recent weeks as a result of the divide between buyers and sellers.
Coupled with the gap in buy/sell side price targets, 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.
Asia is an important export market for European ACN, and for finished goods such as autos.
Traditionally, Europe ACN exports would rise following the the Lunar New Year holiday in Asia, as Asian players look to restock. However, players have yet to see a rise in exports so far in 2013.
Some producers argue acrylic fibre demand is stronger than their expectations, and that although lower than last year, the reduction is not as bad as claimed by some.
"Compared with previous years maybe it's not so good," one said. "Demand now is better than in the fourth quarter. For us the industry is going overall 90%, for the fibre industry. That's not a bad rate."
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