Europe April crude MDI contracts stable to firmer on margins, demand

09 April 2014 23:59  [Source: ICIS news]

LONDON (ICIS)--European monthly crude methyl di-p-phenylene isocyanate (MDI) contract prices were agreed stable to firmer in April, as good demand and margin recovery were weighed against some increases already implemented in March, said market players on Wednesday.

For crude MDI monthly contracts, buyers and one selling source confirmed rollovers and modest increases of €20-30/tonne, while manufacturers and a trader said they had passed on price rises of €50-80/tonne in April, although the magnitude of increase varied, depending on what had been implemented in March.

To reflect the stable-to-firmer sentiment, crude MDI contract prices were assessed at €2,070-2,130/tonne FD (free delivered) WE (western Europe), according to ICIS. This represents an increase of €30/tonne for low-end business, but a rollover at the upper end of the range. The range refers to monthly contract business only.

Numbers either side of the range were also heard, but they were not widely confirmed.

One reselling source said it had achieved rollovers and plus €20/tonne for crude MDI in April, after implementing hikes of €50-80/tonne in March.   

One of the producers said it had secured plus €60-80/tonne in April for those accounts that had not been subject to any increases in March, but acknowledged that a more moderate increase was possible for accounts that had already moved higher in March. The same source said that in terms of actual prices, it considered plus €30/tonne for low-end business and plus €10/tonne at the upper end of the range to be most realistic.

One supplier said it had booked its monthly crude MDI business with price rises of €60-70/tonne in April, but it said it was also aware of some suppliers who were eager to get more volumes, although the latter was not confirmed.

Another seller said it was firm on plus €70-80/tonne for its crude MDI business in April and the second quarter, but said it was facing a lot of buyer resistance. However, it said it was prepared to lose volumes for the sake of already-squeezed margins.

One crude MDI customer in southern Europe said it had accepted plus €20/tonne with some suppliers, while others had kept their prices stable. It quoted its price at around €2,100/tonne Mediterranean on a net basis. 

One main buyer said it had accepted plus €50/tonne for its Q2 crude MDI business and considered a similar level increase realistic for monthly business from January to April in total.

A third buyer said it had received an increase from one supplier of €30/tonne, but it said it had switched suppliers and achieved a price rollover for April. It said it had previously accepted an increase of €30/tonne in March.

For crude MDI Q2 business, prices have generally increased across the board, as the need to recoup previous upstream benzene-related hikes was more necessary, as contracts had been fixed during the first quarter. Suppliers said they have implemented price rises of €60-80/tonne for crude MDI in the second quarter, with initial target hikes of €100/tonne proving unsuccessful.

Buyers said they have largely accepted price increases of €40-60/tonne for crude MDI in Q2, although more modest rises of €15/tonne were also heard. Buyers have acknowledged that while there was an upward price movement for margin recovery reasons, the magnitude of increase was moderated by availability and strong competition downstream.

For pure MDI, manufacturers said that they had implemented price increases of €30-100/tonne for April, with two of them stating that they had achieved larger price rises for pure MDI compared with crude MDI in some cases. This was attributed to ongoing good demand and short supply.  

One manufacturer said it had secured price rises of €80-100/tonne, but conceded that plus €100/tonne was more an exception.

Buying and trading sources confirmed price rises of €20-25/tonne for pure MDI in April. One trader said it had closed some accounts at plus €20/tonne, with its prices typically closer to the upper end of the range in March. It said that these increases for April were in the context of it already having implemented plus €50-65/tonne in March and plus €65/tonne for its Q2 business.

Pure MDI prices were assessed in April at €2,260-2,330/tonne FD, a rise of €20-30/tonne from March. Numbers below the range were heard from one main consumer on a net basis. However, the ICIS range refers to gross values only and average to small volume players, which typically purchase 500-2,000 tonnes per year, according to ICIS methodology.

Crude MDI activity in the downstream construction sector remains robust largely in northwest Europe amid favourable weather conditions. There is, however, some talk that activity in parts of southern Europe remains steady, albeit at a modest level amid ongoing economic constraints. Pure MDI demand remains good, with little-to-no sign of any seasonal slowdown. In Turkey, however, activity remains subdued overall, because of economic and political problems over recent months.

The crude MDI market remains largely balanced, while pure MDI is balanced to short on the back of continued good demand and its lower yield compared to crude MDI.


By: Heidi Finch
+44 20 8652 3214



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