Europe PA output rationalisation necessary - trader

19 March 2013 13:07  [Source: ICIS news]

NUREMBERG (ICIS)--The European phthalic anhydride (PA) market is structurally long and production needs to be rationalised within the next year because of flat to declining downstream demand and poor margins, a trader said on Tuesday.

The trader was speaking from the sidelines of the European Coatings congress and show at Nuremberg, Germany.

A main downstream outlet for PA is plasticizer dioctyl phthalate (DOP), which is being phased out for legislative reasons. Another main end-use sector for PA is resins, the market for which has been quite flat over the past few years because of soft macroeconomic conditions.

The arbitrage possibilities for European PA – particularly to Asia – have been reduced because of increasing production in the region over recent years.

European PA producers have also been struggling with poor margins because of high upstream orthoxylene (OX) costs, and a number of manufacturers have already trimmed their operating rates over the past few months for margin and market related reasons.

PA producer Kemiplas, which has an overall PA production capacity of  52,000 tonnes/year, stopped PA production in eastern Europe for margin reasons last year.

However, Kemiplas is a relatively small PA producer in the overall European market and its production idling has not been seen as sufficient to offset the structural length in the European PA market.

It remains to be seen whether other producers will take any idling measures in the short-to-medium term, but PA players that are not integrated and therefore heavily exposed to the merchant market, or who have been involved in the declining downstream DOP market are “possible candidates”, the trader said.

By: Heidi Finch
+44 20 8652 3214

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