OUTLOOK ’14: Asia’s MMA, PMMA players hopeful of demand recovery

By Eric Su

SINGAPORE (ICIS)–Most industry participants are cautiously optimistic that overall demand for methyl methacrylate (MMA) and polymethyl methacrylate (PMMA) in Asia could be boosted in 2014 as the eurozone crisis eases and the US begins its economic recovery.

Furthermore, the Chinese market is also expected to continue its growth, albeit at a more toned down pace.

MMA demand has been soft throughout 2013 because of a weak performance in the PMMA sector, industry sources said.

Meanwhile, aggressive production cuts and several plant outages of regional MMA producers have maintained the balance between supply and demand for MMA, the sources added.

It has been a difficult year for the market in 2013, not just for PMMA and MMA but for most of the plastic-related industries as most of the major economies globally suffered from some form of crisis throughout the year, some market players said. 

In the near term, MMA demand is expected to pick up in February next year, after the Lunar New Year, as traditionally producers from the downstream sectors tend to restock their inventory levels after the long holiday, market players said.

In addition, a tighter supply can also be expected in the first quarter amid turnarounds at regional MMA facilities, a major producer said.

Japan’s Asahi Kasei Corp shut its 100,000 tonne/year MMA plant in Kawasaki on 10 December and will resume operations in mid-January.

Taiwan’s Formosa Plastic Corp has scheduled a turnaround for its 98,000 tonne/year MMA plant in Mailiao in end-January, while Lucite International has scheduled a turnaround for its 100,000 tonne/year MMA plant in Shanghai in March.

However, a challenge for the MMA producers to achieve their ideal sales margin, to increases  their production and recover raw material costs is the performance of key downstream PMMA sector, an industry player said.

Currently, PMMA manufacturing is the single largest usage of MMA, accounting for close to 50% of MMA demand.

Increases in MMA prices are possible given the growth in other downstream sectors such as emulsion, cast sheet and automotive, but any price gains will likely be capped if PMMA prices remain stagnant.

According to ICIS data, the average spot prices for MMA bulk cargoes of 500 tonnes underwent a sharp decline in April-June 2013, falling to a year-low of $1,985/tonne (€1,449/tonne) CFR (cost & freight) SE (southeast) Asia from $2,135/tonne CFR SE Asia in March as PMMA demand weakened.

Average spot prices of PMMA fell from $2,575/tonne CFR SE Asia to $2,425/tonne CFR SE Asia from March to June.

In the second half of 2013, MMA underwent an uptrend in prices because of tighter supply and firm price discipline by sellers as MMA prices eventually stabilised at $2,050/tonne CFR SE Asia in December, rebounding from the year’s low in June.

PMMA prices have largely remained flat through the second half of 2013 despite the uptrend in the feedstock MMA prices amid weak demand from the downstream sectors, especially the electronics sector.

The performance of the electronics sector was affected by the bearish economic conditions in eurozone and the US, as well as the slowed domestic growth of China.

This trend is not sustainable, especially if the spot domestic PMMA prices and domestic MMA prices in China are almost on par, some market players said.

Unless there is an increase in PMMA prices, there will be limited room for any MMA price increments as it would be difficult to convince buyers to purchase MMA at a higher price than PMMA, they added.

In east China, MMA prices were at yuan (CNY) 15,800-16,000/tonne ($2,603-2,636/tonne) DEL (delivered) while PMMA prices were at CNY16,000-16,300/tonne DEL as of 20 December.

According to market participants, there has been an oversupply situation in the PMMA market in 2013 after an overexpansion in the last few years and long supply is likely to persist.

However, some market participants expect producers to take some measures to lower their inventory levels.

Lowered production run rates, longer shutdowns and perhaps even closure of PMMA plants are some of the possible actions PMMA producers might take to balance out the market, some sources said.

Furthermore, PMMA prices seem to be at rock bottom and hopefully an economic recovery can boost demand and prices, a regional seller said.

($1 = €0.73 / $1 = CNY6.07)