08 May 2013 23:59 [Source: ICIS news]
LONDON (ICIS)--European caprolactam (capro) producers are targeting aggressive price rises in May contracts in the wake of the force majeure declaration at DSM’s 250,000 tonne/year capro plant in Geleen, the Netherlands, they said on Wednesday.
DSM declared force majeure at its Geleen plant following a fire on 23 April, a company source previously confirmed.
As of Thursday 2 May, the outage was expected to last 21-28 days, the source said. The outage has tightened supply and availability is expected to remain limited in May.
As a result, capro producers are targeting price rises in May contracts of as much as €120/tonne.
“For this month, the impact of course has been the DSM situation. Since the news came out, we were almost immediately approached by some of our usual customers,” a capro producer said.
Capro producers are attempting to recover margins. Producers are aware that the situation at DSM will be temporary and are trying to recover margins while supply is tight.
“We have to benefit from this situation in May, if not now then when else? But you have to be careful on what you're asking for - it has to be a sensible approach,” another capro producer said.
Buyers are aiming to limit price rises to €40-50/tonne, arguing that downstream demand remains too weak to secure the full May benzene contract price increase. Although they concede that the DSM force majeure has tightened the market, they argue that availability remains plentiful because of global structural oversupply.
“Downstream, I don't see any price improving, so I really don't see availability constraints or this big opportunity [for producers to increase margins]. As soon as DSM comes back the situation will be worse [for sellers], so my advice to producers is to be reasonable,” a capro buyer said.
Demand in May is flat with April. The majority of players expect May 2013 demand to be in line with May 2012 levels. Some buyers expect consumption to be below last year because of weak fundamentals and a heavy public holiday schedule this year, but add that it is too soon to gauge May order volumes.
May contract negotiations are at an early stage.($1 = €0.76)
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