Europe ADA players see softer November prices on cheaper benzene

06 November 2013 17:38  [Source: ICIS news]

LONDON (ICIS)--Participants in the European adipic acid (ADA) market on Wednesday said they expect the November contract price to fall because of the €78/tonne ($105/tonne) decrease in upstream benzene.

Producer and buyers, however, were divided on the magnitude of the expected price decrease.

Negotiations have just started and producers will try to limit cuts into their margins. From May to November, the average monthly contract price of benzene has fallen by €208/tonne.

However, the average monthly contract price of ADA from May to October has fallen by only €20/tonne.

“Maybe there can also be a reduction range of €20-30/tonne. We will share the cost reduction,” a producer said. If the producer did agree to a price reduction of €20-30/tonne, that would represent around half of the cost pass-through of €50-60/tonne - according to market estimates - from the fall in benzene price.

Producers argue the current shutdowns by BASF, NF Trading and Solvay are limiting the supply of ADA in the market, therefore leaving less room for buyers to negotiate for huge price decreases.

A positive outlook on Europe's economy is raising hopes that demand will also increase. On Tuesday, the European Commission said that real GDP growth for the EU is expected to be flat this year compared with last year, but a growth of 1.4% is expected in 2014.

However, the commission warned about high unemployment levels in the EU, with the forecast jobless rate this year of 11.1% expected to fall only marginally next year to 11.0%.

Some buyers are determined to maximise their potential pass-through from the fall in benzene price.

One buyer said it aims to negotiate a reduction of €60/tonne, arguing that demand remains poor and that producers as well as end users of ADA are soon expected to destock ahead of a new fiscal year.

Another buyer said it has finished its November negotiations early and settled its contract at a reduction of €40-50/tonne. As of writing, the deal was not confirmed from the producers' side.

($1 = €0.74)


By: Vladimir Guevarra
+44 208 652 3214



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