Market intelligence: Europe chemical markets hit a soft patch as coatings season is delayed

21 June 2013 10:03  [Source: ICB]

End-use markets such as paints and coatings have suffered from a cool spring that has delayed the usual peak. In other markets, demand patterns are also not following the seasonal trend

Demand in many derivative petrochemical markets in Europe is stable-to-soft compared with the second quarter of last year.

A cold and wet spring, along with a weakened eurozone economy, has resulted in some markets seeing slower - and later - consumption than is typical.

Demand from the coatings sector improved during the European spring, but it was sporadic and did not show the classic upturn that has become expected during the market's peak season.

April and May mark the start of the traditional peak production season for many industries, as activity from the end-use automotive and construction sectors ramps up and continues into September. A lull is usual during the August summer holidays.

The outlook for June demand in the acrylate esters market is stable, despite a slightly slower start to the season. "Demand is good and volumes are in line with last year," an acrylic acid (AA) and acrylate esters producer said. "The coatings season is doing exactly what it was doing last year. It was difficult last year, to be honest. Demand has increased through the year. It's been a bit slower to start climbing."

Another producer said: "June looks okay, but it could be better There are signs of some improvement but it's not very consistent and not very strong The signals are so contradictory, and it's difficult to find consensus," the producer added.

"We're seeing a shifted coatings season. The weather should improve in June for all of Europe, but people are very cautious. Seasonally, demand has to pick up. The typical peak, the 'season' is simply not starting - it's slow. Our customers are struggling to stick to the volumes There is no strong demand."

Demand for melamine has dropped by up to 30% compared with levels in the second quarter of 2012, and is expected to weaken in the third quarter. Macroeconomic instability has slowed consumption as market participants continue to exercise caution. The second quarter typically sees the strongest demand, boosted by increased activity in the end-use construction sector.

Buying interest in the polymethyl methacrylate (PMMA) market is down by a few percent compared with the same period a year earlier.

"It's been quiet since the beginning of the year," a producer said. "The trend is still at 2% below last year. We see two things: the auto industry is at a few percent below levels last year; and sheet extrusion is better than last year by a few percent, but this is a plus. It doesn't compensate for the rest, but it's a plus. For the rest of the market, it's less than last year. Small companies are suffering because of a lack of credit."

The producer added that 2013 is running more smoothly than 2012. "In the second half of last year, there was lots of destocking. This year is lower than last year but we don't expect a big decrease [in the second half of 2013] because it has already been done.

"The second half should be better than last year. That is a small bubble of oxygen during this time, and with this economy."

In the feedstock methyl methacrylate (MMA) sector, a producer said: "Seasonality is not as much as it has been - it has picked up, but not as much as last year."

An MMA trader said: "The market is so lousy it can only get better."

Butyl acrylate (butyl-A) and MMA availability has tightened in on a force majeure announcement for butyl-A and a notice of sales control for MMA. Sellers are hearing additional enquiries for material, but the general demand picture remains stable.

Demand for epoxy resins, polycarbonate (PC), epichlorohydrin (ECH) and bisphenol A (BPA) seems to be picking up after a weak April and May, when the weather was too poor for outdoor construction projects. There are expectations that the peak season this year will be delayed slightly, and the traditional slowdown in July and August will not take place as the construction industry will "play catch-up" after a slow start to the year.

Some sources believe that this year is very different from any they have seen before, and do not expect any major improvement in demand.

A caprolactam (capro) producer said: "People are happy just to see stable demand." And a southern European capro buyer said: "May was something like 25% lower compared with one year ago. It's been similar to 2008/2009, if not worse. "

An adipic acid (ADA) producer said: "Demand is reasonable both on nylon adipic and non-nylon adipic," and added that it was turning out to be a surprisingly stable year. The producer said that there would be fewer plant outages in August than usual, and added that there may not be a peak season this year for the ADA market, which might lead to more steady demand that is spread out through the year.

An acrylonitrile (ACN) trader said: "The market is flat because nobody wants material. I think demand this year is definitely lower than last June. It's hard to say exactly how much by - 10% maybe - maybe more even."

A flake producer from the recycled polyethylene terephthalate (R-PET) market said: "Relative to last year, people are very cautious, they're running, but it's literally hand-to-mouth, and their customers are the same. It's very much a wait-and-see type market Is the weather going to go up? Will auto sales improve? [The market is] very uncertain."

The engineering plastics sector does not seem to be doing what it is supposed to at this time of year, a polyacetal (POM) and polybutylene terephthalate (PBT) trader said. The producer said: "June demand this year is 3-5% less compared with last year. POM is bad, it's about 10% down. It's the economy in Europe, and especially automotive. I don't expect any relief in the next three months I don't see a drop in material, but no increase. It's never been as boring as it is at the moment."

The trader added that an outage at a production facility has had no effect on the market. "The market is not affected by anything because the demand is not there."

However, it is not clear whether real demand is the issue or whether buyers are playing a waiting game.

The first acrylates producer said: "Volumes are nowhere near disastrous - it's the margins."

In May, the producer said: "It is a shame, as I hear all the time that the market is not picking up and the 'coatings season' is not happening. We are seeing demand from the very same customers. I believe it is what they call a game of pricing."

Additional reporting by Janos Gal and Mark Victory

By: Helena Strathearn
+44 208 652 3214

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