Europe ADA demand weakens on shoe sole raw material tightness

17 April 2013 17:34  [Source: ICIS news]

LONDON (ICIS)--European adipic acid (ADA) demand is falling because of weak demand from the shoe sole sector caused by a lack of upstream materials, sources said on Wednesday.

Despite the second quarter traditionally being the start of the peak-season for the downstream polyurethane (PU) market serving the shoe sole sector, there has been no uptick in consumption so far this year.

Demand from PU producers selling in to the shoe sole sector is weak because limited availability of key raw material pure methyl di-p-phenylene isocyanate (MDI) has meant they cannot produce at full rates. This in turn has limited off-take of ADA.

Although nylon 6,6 is a key downstream market for ADA, most nylon 6,6 players agree contracts on a formula basis, with freely-negotiated monthly contracts predominantly representing PU players connected to the shoe sole sector.

Dow Chemical's and BASF’s MDI operations in Stade, Germany, and Antwerp, Belgium, respectively, continue to run at reduced rates so far in April, sources from both companies said on Tuesday.

Dow Chemical’s 200,000-220,000 tonne/year MDI unit in Stade has been running at restricted rates since the fourth quarter of 2012, a situation that has mainly been linked to feedstock constraints.

BASF’s MDI plant in Antwerp, which has a nameplate capacity of 560,000 tonnes/year and is the largest MDI unit in Europe, has been subject to reduced operating rates since February 2013. This was because of upstream supply limitations.

The crude MDI market is described as sufficient despite these output constraints, as they have been mitigated by weak demand. Pure MDI supply remains more restricted however, because of its lower yield when compared with crude MDI and the fact that its demand has been reasonable-to-good for the season during the first few months of the year.

European ADA April contract negotiations are ongoing. Several ADA buyers are targeting price decreases because of a €62/tonne ($82/tonne) decrease in the upstream April benzene contract price and weak demand.

ADA producers have been targeting price increases to restore margins lost against benzene since mid-2011.

Additional reporting by Heidi Finch

($1= €0.76)

By: Mark Victory
+44 208 652 3214

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