EU ADA prices seen softer despite Solvay shutdown

09 October 2013 17:18  [Source: ICIS news]

LONDON (ICIS)--The October contract price for European adipic acid (ADA) is expected to fall despite a threat of tighter supply following Solvay's shut down of its 300,000 tonne/year ADA plant in Chalampe, France, sources said on Wednesday.

Market participants said ADA prices should fall because of the recent €51/tonne decrease in the cost of upstream benzene for October.

Solvay said last week it had shut down its plant for an upgrade, aiming to reduce carbon emissions by 11,000 tonnes/year and cut energy consumption by 8 megawatts/year. A company source confirmed on Monday that the plant will restart in December. 

Once the upgrade is completed, part of the capacity is expected to remain temporarily offline depending on demand.

The shutdown follows a move by BASF in late February to suspend a line at its 260,000 tonne/year plant in Ludwigshafen, Germany. Initially, this was for maintenance, but poor trading conditions have resulted in an extension of the outage until downstream demand improves, a company source previously confirmed. The line stoppage has reduced BASF’s maximum operating rates to around 75% of nameplate capacity.

The two shutdowns and the expected reduction in Solvay's production will tighten the availability of ADA in an oversupplied market. Sources, however, were divided on whether that tightening will be enough to affect prices.

A producer said tighter supply would support the case for steady prices. It added that it will push for a rollover in October, but it is also open to reducing prices by €10-20/tonne, reflecting the decrease in the cost of benzene for October.

“The market is undergoing a process of rebalancing of supply. For us, this is good news,” it said.

However, some buyers are asking for cuts of up to €40/tonne. Buyers are arguing that Solvay's shutdown will not have a huge impact on supply because of various reasons: the company would have already prepared stock ahead of the shutdown, demand toward the year-end is not expected to increase because of uncertain macroeconomic conditions, the market is still oversupplied, and cheaper ADA from Asia is available.

“We don’t see any problem in buying material even if Solvay stops for two months,” a buyer said.

Another buyer said it has settled early and negotiated a €25/tonne decrease from its supplier. The reduction had not been confirmed on the producer side.

($1 = €0.74)

By: Vladimir Guevarra
+44 208 652 3214

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