Price and market trends: Europe MDI contracts in April stable to firmer on costs versus market

19 April 2013 09:22  [Source: ICB]

European monthly crude methyl di-p-phenylene isocyanate (MDI) contract prices have been agreed with rollovers to average increases of €30-50/tonne ($39-66/tonne) in April, as margin recovery was weighed against subdued demand and good supply, sources said on 10 April.

Construction Rex Features

Rex Features

A seasonal uplift in construction should boost crude MDI demand

To reflect the middle ground, crude MDI prices have been assessed in April at €2,060-2,150/tonne FD (free delivered) WE (western Europe), according to ICIS. This represents a price rise of €30/tonne at the low end and a rollover at the high end of the range. A few sellers pegged their crude MDI range slightly higher, in the upper €2,000s/tonne FD as a minimum in April, but there was insufficient market confirmation to substantiate this as a general level.

MARGIN RECOVERY

Sellers said they had maintained a firm price stance in April, based on the need to recover margins and to achieve re-investment economics. Suppliers said they had not recouped margin losses from the second half of 2012, when upstream benzene costs moved up, but crude MDI prices remained stable.

Sellers also said that the price reduction in the upstream benzene contract price in April was insufficient to compensate for previous feedstock increases - especially in view of heightened upstream volatility. However, buyers said that the reduction in the upstream benzene contract price would make price increases for MDI difficult going forward, particularly if the softer trend in the upstream benzene contract price were to continue.

Crude MDI buyers confirmed rollovers to moderate price increases in April, stating that costs and margin recovery over recent months were being offset by soft market conditions.

Larger price hikes of €110-150/tonne for crude MDI contracts were mentioned by a few sellers in April, but there was insufficient market confirmation to substantiate this.

One consumer said one of its suppliers had increased its crude MDI prices by €40/tonne in April, but it had bought with a second supplier, who had offered a more competitive price €30/tonne below its first supplier. However, this price reduction was not representative of a general market trend.

Crude MDI prices either side of the range were also heard in April, but were not widely confirmed.

For quarterly crude MDI accounts, price settlements ranged between rollovers to average increases of €50-100/tonne in the second quarter, depending on source. One producer said it had increased its crude MDI contracts in the second quarter by €150/tonne as a minimum, spread through the quarter. However, there was insufficient market to substantiate this larger price increase as a general trend.

For pure MDI, prices have been agreed higher in April, supported by limited supply and reasonably good demand. Reported price increases have ranged between €20-100/tonne in April, although there was some buy-and sell-consensus at plus €20-30/tonne. Pure MDI prices in April have been assessed at €2,230-2,260/tonne FD WE. Numbers either side of the range were also mentioned, but they were not widely confirmed.

EU MDI

Crude MDI consumption could be better for this time of year, which is traditionally a seasonally healthy period in the downstream construction sector, according to sources. However, demand remains slow for weather and economic-related reasons. A seasonal pick-up is expected over the next few months, weather permitting, although this is likely to be limited to some extent by the fragile economic climate.

PURE MDI HOLDS UP

Pure MDI continues to hold up reasonably well, although it is expected to show a seasonal slowdown during the second quarter.

The crude MDI market remains well supplied, despite some output constraints, as demand remains subdued. Pure MDI supply, however, remains restricted because of seasonally healthy demand in the first quarter. Its lower yield as a co-product in MDI manufacturing also means that it has been most affected by the spate of MDI output constraints.

BASF's MDI plant at Antwerp, Belgium, has continued to run at reduced operating rates since February, because of ongoing feedstock supply constraints.

Output at Dow Chemical's MDI facility at Stade, Germany, remains restricted, also for upstream reasons. The restricted operating rates at the MDI unit started in the fourth quarter of 2012 and are expected to continue until at least the end of April, pending the completion of upstream plant maintenance at another site.


By: Heidi Finch
+44 20 8652 3214



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