Low Europe ACN spot margins push produce to focus on contracts

25 October 2013 15:58  [Source: ICIS news]

LONDON (ICIS)0--Low margins on spot prices have lead European acrylonitrile (ACN) producers to increasingly sell on a contractual basis, sources said on Friday.

The average spread between European acrylonitrile (ACN) spot prices and feedstock costs in 2013 is at its lowest level since the monthly propylene contract price was introduced, according to ICIS data on Friday.

“[Weak] margins is a reason producers are concentrating on contract,” an ACN buyer said.

The average spot price spread so far in 2013 has been minus €44/tonne at the low end of ICIS’ spot price range, to plus €5/tonne at the top-end.

“It was a year we should forget on ACN,” a distributor said, talking about 2013 spot margins.

Nevertheless, the spread between ACN contract prices has remained healthy in 2013.

“Contract is still very much more margin than spot,” an ACN producer said.

As a result of weak margins on the spot market, producers are selling the majority of their volumes on a contractual basis.

My assumption would be in a long market suppliers would want to contract – only aiming for spot when they can get higher returns,” an ACN buyer said.

Year (year to date for 2013)

Average feedstock cost (euros/tonne)

Average spread against ACN contract price at low-end of range (euros/tonne)

Average spread against ACN spot price at high-end of range (euros/tonne)

2009

757

556

569

2010

1163

676

717

2011

1416

733

759

2012

1442

636

664

2013

1386

640

661

The average production cost was calculated using the mean yearly propylene contract price and the yearly mean ammonia Yuzhny spot price, which was then multiplied at a production ratio of 1.1 for propylene and 0.5 for ammonia, and then added together. The values used do not include discounts and have been converted to euro equivalents.

In Europe, ACN contract prices are pre-discounted and typically define key acrylonitrile accounts settled on a monthly basis.

The general consensus is that the European contract range is representative of the resins industry. This is used as a benchmark for fibre contracts which are held at lower numbers.

ICIS records for the monthly propylene contract price date back to 2009.

($1 = €0.72)


By: Mark Victory
+44 208 652 3214



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