05 September 2013 11:00 [Source: ICIS news]
LONDON (ICIS)--European adipic acid (ADA) contracts for August have settled mostly at rollovers because of expectations that upstream benzene cost falls would be short-lived, sources said late on Wednesday.
The August benzene contract price decreased by €32/tonne ($42/tonne), but this fall was reversed when the September benzene contract price rose by €31/tonne. This marks the third straight month of rollovers for European ADA.
Producers were keen to boost their margins and were therefore unwilling to pass some of the €32/tonne savings they had in August to customers.
“The margins have recovered partly in 2013, but due to the extreme margin squeeze in 2012, they are not yet back to a level which we would see as sustainable,” a major producer said.
“We are willing to walk away from business if we cannot find an agreement on prices and we accept reduced volumes if this is a prerequisite for reasonable margins,” it added.
Producers’ margins fell in the middle of last year, when prices of ADA decreased despite higher costs in benzene.
Several buyers also agreed to rollovers in early August, as they were preparing for the summer holiday shutdowns.
One buyer had its factories closed for three weeks in August, and said that the lower volume ordered last month meant that any price decrease from a supplier would have translated to a small amount in savings anyway.
Nevertheless, a few buyers said they achieved price decreases of up to €50/tonne, arguing that benzene contract price movements should be tracked on a monthly basis, and that there was an oversupply of ADA in the market.
($1 = €0.76)
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