Europe PGE producers absorb January feedstock increases

17 January 2014 17:50  [Source: ICIS news]

LONDON (ICIS)--Producers in the European propylene glycol ethers (PGE) market are absorbing increases in raw material costs because buyers are not accepting price hikes in spot methoxy propanol (PM) and methoxy propanol acetate (PMA) prices, market sources said on Friday.

Seasonal demand after the Christmas and New Year holiday period has been slow.

“[Demand has been] frustratingly slow. The market is a bit slow to come back, checking stock and deciding to place orders,” a producer said.

The first quarter of the year is not a busy time for the paint and coatings industry because of a slowdown in construction projects during winter. 

“It is very difficult to say if the market will accept price increases that producers are trying to apply,” a distributor said.

Producers have had to absorb the €20/tonne increase in the January propylene contract price, as well as the €37/tonne increase in the quarterly methanol contract price or risk losing volumes. Several producers said it was more important to keep volumes consistent at the beginning of the year rather than pass through the feedstock increases to customers. 

There was some upward movement in spot prices seen in a few cases, with one producer saying it had managed to pass on a €10/tonne increase at the low end of the above price range, but this increase was not representative of the market as a whole. 

“I think the only thing which will really happened is an adaption here and there in order to stay close to the competition,” a distributor said of the few increase it saw in the market.

Some players are looking at February feedstock prices to see if there are any signs of further increases. If propylene rises next month, it may give more weight to producers' attempts to pass on raw material costs to the market because they have already absorbed the increases from January.

By: Matt Tudball
+44 208 652 3214

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