Price and market trends: Europe etac market sees 2-tiered pricing system

15 March 2013 09:27  [Source: ICB]

Competition from imports is fierce but one distributor buys at both ends of the spectrum

The European ethyl acetate (etac) market is pulling in two directions, one strongly driven by cost pressures and the other by a bid to gain market share, creating a two-tiered pricing system in the spot market, industry sources said.

Etac prices have been stable from late February to early March at €890-930/tonne ($1,171-1,274/tonne) FD NWE.

A key European supplier and an importing supplier are offering etac as low as in the high €800s/tonne FD NWE. These offers are mostly available in the Benelux region.

The European supplier said it does not have "the luxury" of moving its etac offers up, due to the stiff competition for etac market share.

Etac supply in Europe is structurally short as it is limited to one major local producer, and consequently attracts regular imports from Mexico, India, Brazil and South Africa, Eurostat data shows. Competition between local and importing producers is fierce, and acts as a dampener on prices.

Lower-level prices are strongly refuted by the majority of local and importing producers and distributors as unworkable because of cost pressures. They quote prices in the low-to-mid €900s/tonne FD NWE.

An importing producer said: "We don't see €890/tonne FD. We have concluded at €930/tonne FD to distributors, last week and this week."

Additional factors exerting upward pressure on prices include stable demand combined with a potential for slight tightening of supply, and a fluctuating euro-US dollar exchange rate, sources said.

"Overall, there is a shortage of material. Europe is always a net importer. I see the usual [importing] players are not able to offer usual volumes, [and] we [are] receiving more enquiries," the producer said.

Local etac production units are running at normal levels, and supply from them into the spot market remains healthy.

However, Indian export volumes into Europe could be under pressure in the coming weeks because of unfavourable euro-US dollar exchange rates and the prospect of an increase in feedstock ethanol costs.

Adding further proof of the two-tiered pricing in the etac market, a distributor said it had to buy etac from producers with offers at both ends of the spectrum.

"Etac prices are not transparent. We bought €860/tonne FCA from traders in the import market. But we also bought €910-920/tonne FCA from a producer," it said.

Despite the two-tiered market persisting in Europe for days, things could change in the near future as a major European supplier said it plans to increase its mid-March offers by €20-25/tonne, which could potentially lift the downward pressure on prices.

By: Cuckoo James
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