Price and market trends: Europe November MDI contracts stable on restricted output vs costs

22 November 2013 10:01  [Source: ICB]

Sellers say balanced-to-tight market outweighs benzene’s fall

European methyl di-p-phenylene isocyanate (MDI) contract prices have largely rolled over into November, as some recent and ­current MDI output constraints and reasonable demand for the time of year are being weighed against upstream benzene cost relief, market players said on 13 November.

A proportion of contracts for MDI have been fixed for two months (October-November) and the fourth quarter, which means that these prices have also remained stable in November.

Players said that the drop in ­benzene costs in November had not had any real effect on MDI prices, as a number of contracts had already been concluded prior to this.

One buyer, however, said it would look for lower MDI prices in December if the bearish upstream sentiment were to continue and the expected seasonal drop in demand were to materialise.

European November monthly contract prices were assessed stable at €2,020-2,100/tonne ($2,730-2,838/tonne) FD (free delivered) WE (western Europe) for crude MDI and €2,230-2,280/tonne FD WE for pure MDI, according to ICIS. Numbers below the range for crude MDI were heard from a few monthly contract buyers, albeit on a net rather than gross basis. The ICIS range refers to gross prices only.

Selective price increases of €20-30/tonne were mentioned by a few sellers for crude MDI and pure MDI in November, and there was some market talk about one producer targeting increases of €70/tonne. However, there was no other market confirmation of this as a general market trend.

By contrast, price reductions were heard from one or two crude MDI buying sources in November and the fourth quarter, who suggested that sellers were keen to retain volumes amid the looming seasonal slowdown in demand. However, price reductions were not widely confirmed in the market.

Crude MDI consumption in the main downstream construction sector remains fairly steady in the first half of November when compared with October, with little-to-no evidence of any real seasonal drop in demand, supported by relatively mild weather so far this winter.

However, players acknowledge that as soon as temperatures drop, demand in the 
construction sector is likely to slow accordingly, as building activity is heavily dependent on weather conditions.

MDI supply is largely balanced with demand requirements. Buyers said they had sufficient supply and had not experienced any availability problems, despite output limitations for a few main sellers over recent weeks, which they attributed to demand remaining just satisfactory for economic reasons and amid looming low seasonality.

MDI sellers, however, have considered the market to be balanced to tight in the first half of November on the back of a spate of production constraints and solid demand.

In manufacturing news, BASF’s MDI unit at Antwerp, in Belgium continues to run at reduced operating rates and this is expected to last for the next weeks. MDI output has been restricted at the site over the last few months for either technical or feedstock related reasons.

By: Heidi Finch
+44 20 8652 3214

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