OUTLOOK '14: Weak prospects for EU benzene-based MA production

31 December 2013 11:00 Source:ICIS News

By Samuel Weatherlake

LONDON (ICIS)--The move away from benzene-based maleic anhydride (MA) production in Europe in favour of butane-based output that was seen in 2012 has remained in effect throughout 2013, and there is no indication that this is likely to change in the foreseeable future.

Europe’s 44,000 tonnes/year of benzene-based production capacity now represents around 15% of Europe’s total MA production capacity of 289,000 tonnes/year, according to ICIS data.

Italy’s Polynt owns a 36,000 tonne/year benzene-based MA plant in Scanzorosciate, in addition to its 65,000 tonne/year n-butane-based facility in Ravenna.

Zaklady Azotowe Kedzierzyn (ZAK)’s benzene-based MA plant in Kedzierzyn-Kozle, Poland, has a nameplate capacity of 8,000 tonnes/year.

ZAK idled its plant in April 2012 because benzene costs were too high. Polynt ceased operations at its Scanzorosciate plant in the second half of December 2012 for the same reason.

A source at ZAK said in February 2013 that the company would consider restarting its plant if market conditions improved, but confirmed in September that the plant remained down.

Polynt restarted its Scanzorosciate plant in August to cover requirements during a shutdown at its Ravenna plant. However, a company source said at the end of November that the plant had been taken off line pending a review of the situation early in 2014.

The rising price trend seen on benzene in 2012 was reversed over the course of 2013. However, further supply constraints are seen as a strong possibility by some industry analysts.

Aside from volatility and bullishness on feedstock prices, benzene-based MA producers have also had to contend with increased opportunities for buyers to secure tonnes from alternative sources.

The domestic supply situation improved significantly in 2012 as a result of Sasol-Huntsman’s 45,000 tonne/year expansion at its MA facility in Moers, Germany, which came on line in the first half of the year, raising the plant’s nameplate capacity to 105,000 tonnes/year.

Notwithstanding the cost advantages enjoyed by US producers, the average monthly import volume into the EU was around 800 tonnes lower in the first three quarters of 2013 compared with the full-year monthly average for 2012, according to data from European statistics agency Eurostat.

A total of 30,240 tonnes of MA was imported into the EU during 2012, compared with 15,509 tonnes in the first nine months of 2013, according to Eurostat.

A series of planned and unplanned outages at European plants in September/October tightened the market balance and prompted a €50/tonne increase in Q4 contract prices.

Nevertheless, this followed an unexpectedly poor second quarter, which is usually peak production season for the downstream unsaturated polyester resin (UPR) sector.

Activity was undermined by a combination of continuing macroeconomic weakness and unseasonably cool weather during the European spring.

Looking ahead to 2014, one producer said it expects a strong first quarter in terms of demand, but was not sure how offtake levels would compare with the first quarter of 2013.

Demand for some applications should increase in 2014 on positive economic indicators, a producer said, although this would probably not include the UPR industry. As a result, total demand should be slightly higher in 2014 than in 2013, the source said.

A second producer offered a similar perspective on market prospects for 2014, but noted that this is unlikely to mean that benzene-based MA production becomes economically viable.

Nevertheless, the source said that Europe should be self-sufficient in terms of capacity as long as the major butane-based producers maintain high operating rates.

The source concurred that the UPR sector will not be a strong performer next year, but felt nevertheless that the worst is over. “It can’t get worse,” the producer said.

A reseller in the UK said it did not expect to see price reductions in the first half of 2014, while increases are a possibility, given that the first and second quarters usually see the strongest demand.

A distributor suggested that the European MA market could increase by 2-3% in 2014, and observed that there is more optimism than there was for 2013.

By Samuel Weatherlake