US July acrylates gains proposed on rising propylene

19 June 2013 23:14  [Source: ICIS news]

HOUSTON (ICIS)--US acrylic acid and acrylate esters producer Dow Chemical has proposed contract increases of 5 cents/lb ($110/tonne, €83/tonne) effective 1 July, but buyers are bristling at the fact that the initiatives exceed the anticipated gain in June propylene feedstock costs.

Buyers were broadly sceptical that the full increase would be realized, citing lacklustre demand and expected June propylene price increases of 2-3 cents/lb.

One buyer suggested that no other acrylates producers would seek July increases.

“I don't see how it will hold up. Even if propylene only settles at plus 3 cents/lb, I don't think any other US producer will try an increase for July,” the buyer said, citing plentiful supply amid persistently weak demand that many say is pent-up because of weather–related delays in the spring coatings season.

“I can’t see it happening,” another buyer said. “Demand isn’t that strong, and propylene is not the only story. I do expect there to be some `Oh boy, look what the other guy is doing; let’s pile on.’ But when the buyers say, 'Cut it out', that will be it.”

In the meantime, June acrylates contracts still appeared likely to settle at rollovers, based on minimal movement in May chemical-grade propylene (CGP) contract values. However, a couple of buyers were still holding out for decreases.

Glacial acrylic acid (GAA) prices for May were in a range of $1.08-$1.12/lb, as assessed by ICIS.

One producer previously said it had settled June contracts flat with some of its customers - without much objection - and other buyers said it was unlikely that producers would give up the 1 cent/lb margin from the May propylene contract reduction despite soft coatings demand.

Producers mostly expect a seasonal uptick in demand to occur soon, but it has still not effectively surfaced. Most market participants say the market is stable – not yet resurgent.

In the meantime, US June propylene could reach a split settlement.

A buyer and seller each said that June polymer-grade propylene (PGP) contracts could increase by 3 cents/lb while CGP contracts might increase by 2 cents/lb.

If this occurs, it would be the first split settlement since March 2011, when PGP contracts fell by 5 cents/lb and CGP contracts fell by 1 cent/lb. It also would widen the gap between US PGP and CGP contracts to 2.5 cents/lb, its widest since a 5.5 cent/lb gap in January and February 2011.

The anticipated June propylene increase prompted commensurate price-increase initiatives for July oxo-alcohols 2-ethylhexanol (2-EH) and n-butanol (NBA).

Besides Dow, other US acrylates producers include Arkema and BASF.

($1 = €0.75)

By: Larry Terry
1 713 525 2653

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