LONDON (ICIS)--European methyl di-p-phenylene isocyanate (MDI) contract prices have rolled over into December in most cases, as the spike in the upstream benzene contract price has been weighed against the seasonal slowdown in demand, market players said on Wednesday.
To reflect the general price stability, the MDI price ranges for December remain valid 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 for pure MDI, according to ICIS.
There were numbers below the ranges from a few buyers but these were not widely confirmed.
A few price reductions were heard from some crude and pure MDI buyers, but this was not seen to be the general market trend. In fact, one of the crude MDI customers acknowledged that it had seen some price decreases from importers only, stating that it had already booked this business earlier.
By contrast, producers said there was a need to raise MDI prices as soon as possible based on intensified cost pressure and the need to recoup lost margins, but they acknowledged that it would not be practical to pass this on in December amid the seasonal lull in demand.
Buyers strongly contested any upward price move in December stating that it was not justified from a market perspective amid seasonally weak offtake and good supply.
Some monthly MDI customers said they had been offered price rollovers and some had accepted this, although one of the buyers said they had not concluded any December business, stating that they had no volume requirements.
Another customer said it had heard of stable prices in some cases, adding that it had been offered a price decrease but had also not bought any product amid seasonally very low demand.
Some customers and one pure MDI trader considered it more realistic for sellers to try and lock-in some volumes in December rather than having any chance of raising prices. This is in view of stricter inventory controls at year-end for working capital reasons and a shorter working month because of the Christmas/New Year holidays.
In addition to monthly contract business, there are also a proportion of crude MDI contracts where prices have been fixed for the quarter, which means that they will roll over into December.
Some manufacturers said they would look to postpone any price increases for MDI until January, or at least in the first quarter after the holiday period. They said that the need to recoup lost margins amid higher upstream costs in December is likely to be supported by some restocking activity in January.
One manufacturer said it would look for a minimum increase of €50/tonne for its MDI business in January and the first quarter. Another seller said it would also go for an increase, although the magnitude was not yet defined, pending further feed developments.
Buyers, however, considered that it would also be difficult to increase prices in January, particularly for crude MDI, where downstream demand from the construction sector is likely to remain in low season.
Crude MDI is very much weather-dependent and is traditionally in low season during part of the fourth and first quarters of the year. Despite this, one monthly crude MDI customer did not rule out the possibility of an upward price move if there was a firm producer stance across the board.
A second monthly crude MDI customer, albeit in the Mediterranean said it had fixed its contracts for December until mid-January to cover the holiday period and it said it is too early to discuss price ideas for the second half of January.
Another crude MDI customer said it did not expect to see any chance of any price increases until later in the first quarter, although it said that this will also depend on the weather and how demand will pan out.
A few quarterly contract buyers considered that any upward price move for MDI in the first quarter was not justified.
One of the customers said that upstream benzene costs had mainly come down during the fourth quarter and there was no compensation for this in the MDI price and therefore it did not see any reason for an increase when benzene only moved up in the last month of the fourth quarter. The other customer said that it considered MDI prices high relative to the ongoing fragile nature of the downstream construction industry for economic reasons.
One pure MDI customer said it had not yet received offers from all producers for January, but it said it had already been offered a price rollover for January from one supplier. However, this was not confirmed on the sell-side.
Crude MDI consumption remains seasonally low as expected. However, a few sellers considered demand to be holding up reasonably well at least in the first part of December. One of the suppliers said that its demand had been better than expected for this time of the year and it had not seen any considerable seasonal slowdown. It attributed this to the weather still being reasonable so far this winter.
The MDI market is largely well supplied for the main MDI grades, as any recent output constraints are now over and demand is tailing off seasonally.
There is some expectation that the MDI market could lengthen during December, as the seasonal lull in activity becomes more apparent during the holiday period in the second half of December.
($1 = €0.74)