Price and market trends: Europe polyols roll over in December as costs rise but demand falls

13 December 2013 15:04 Source:ICIS Chemical Business

The majority of European polyols prices have settled in December at a rollover, despite higher feedstock costs, because of long supply and short demand in the seasonally quiet month, market sources said on 4 December.

Feedstock propylene costs rose by €30/tonne ($41/tonne) in December. Nevertheless, polyols prices rolled over, reflecting seasonally low demand in the short December month, which was compounded by de-stocking activity as companies seek to reduce working capital ahead of the year end.

“Despite the propylene increase, as the market is long, we got a price rollover, “ said a buyer. Producers indicated that due to the short month and low demand, increasing prices would not have been feasible.

“Production is lower in in December as it is short month, so there is practically no chance to increase prices,” a producer said.

‘LOW, SLOW AND DOWN’
On the whole, buyers said the market is long as demand is low because of the seasonally quieter Christmas period.

“Demand is low, slow and down. Many customers will close around 20 December, so demand for the month is lower,” said another buyer.

In light of higher costs and a price rollover, one producer said it will try to reclaim the lost margin in January and is hoping to raise prices by €20-30/tonne.

Ideally, however, it said its target is to raise prices by €50-70/tonne, in light of lost profit over the last two years. It said any price increase would likely be restricted to flexible polyols as it is the off season for rigid polyols. Nevertheless, any potential price move would depend on supply and demand fundamentals as well as feedstock price moves, it added.

Another producer said it would attempt to refrain from raising prices in January unless it had to, and would instead focus on securing volumes over margin improvement.

A third producer said that if January feedstock costs rise it will increase polyols prices, however, it noted that it will be hard to raise prices if feedstock costs stabilise.

By Iain Packham