08 January 2014 17:26 [Source: ICIS news]
LONDON (ICIS)--Following the €20/tonne hike in the January feedstock propylene contract, European acrylic acid (AA) and acrylate esters producers are seeking similar - or higher - hikes for the sector to regain margin, sources said on Wednesday.
AA production margins have been squeezed since 2012, and producers are looking to recoup costs as they deem current margins unsustainably low.
“We really are not having good margins on these markets,” one producer said.
Demand is picking up compared with levels seen in December as players are restocking after inventories were lowered at the end of 2013 to reduce working capital.
Some sources said discussions could be difficult and prolonged this month, partly as talks will be starting one week later – owing to the holiday period - and as targets vary widely.
Buyers are looking to resist potential increases that typically feed down from the propylene contract price as market dynamics are still soft, despite the firming sentiment versus December.
One buyer said that suppliers recognise that an increase in line with the propylene contract does not reflect the market.
It added: “Material is out there. And because I'm getting some fairly desperate calls to shift material, I would be very surprised to take an increase. I would suggest they [prices] will rollover.”
Activity in the construction sector is being slightly boosted by mild weather conditions in many parts of Europe.
“What we see for January order entries looks very promising,” another producer said. “It's a warm month so conditions are quite good. The construction industry is finding it easier to work in such conditions compared to other years at the same time.”
A clearer pricing picture is expected to emerge next week.
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