Improved weather helps fuel demand but ongoing economic weakness limits the upside
European crude methyl di-p-phenylene isocyanate (MDI) monthly contract prices have mainly firmed in March on the back of bullish sellers seeking margin recovery and robust demand in northwest Europe, said market players on 19 March.
Manufacturers stressed the need to recoup lost margins, following previous increases in the benzene contract price over the past few months.
These sellers said the reduction in the benzene contract price in March or the recent softening in upstream crude values over the last week was insufficient to compensate for the previous benzene hikes.
Better-than-expected demand for crude MDI in the downstream construction sector in northwest Europe during the first quarter amid milder temperatures across most parts of Europe have also helped support an upward price movement, said sellers, a view also held by buyers.
While crude MDI price increases of €20-80/tonne were mentioned, in terms of absolute numbers, price rises of €20-30/tonne were most realistic.
One manufacturer acknowledged that while it had implemented price increases of €30-50/tonne, it considers rises of €30/tonne more representative.
Another supplier said it had secured price rises of €50/tonne for its monthly accounts in March, but conceded that in terms of actual numbers, an increase of €25/tonne for low-end business was more appropriate.
Some buying sources in northwest Europe said they had agreed price rises of €20-30/tonne in March for monthly business, while larger price hikes of €50-80/tonne were also reported but not widely confirmed.
Monthly crude MDI contract prices in March were assessed up by €20-30/tonne at €2,040-2,130/tonne FD (free delivered) W (western) Europe, according to ICIS.
There were also a few exceptions. One reselling source said it had accepted price hikes of €50-80/tonne from its suppliers in March, but had struggled to pass on price increases in excess of €50/tonne to customers, losing some volumes as a result.
The same source quoted prices up to €2,150/tonne FD, but there was insufficient market confirmation to substantiate this.
By contrast, crude MDI prices below the range were also reported from one crude MDI customer in northwest Europe, but this was on a net basis. The ICIS range refers to gross prices only.
Another customer, albeit in southern Europe said it had accepted price rises of €30-50/tonne from two of its suppliers in March, but had been offered a rollover from another seller, who was expected to postpone its price increases until April.
The same buying source quoted its March crude MDI price around €2,100/tonne FD on average on a net basis and for smaller volumes – below the assessment basis.
The published crude MDI range refers to average volumes of 5,000-10,000 tonnes per year, according to the ICIS methodology.
For pure MDI, there was some variation in settlements in March, depending on source and in some cases, depending on region as well.
Prices were largely firmer, particularly in northwest Europe. Price rises of €30/tonne were typically reported, although increases of €50-65/tonne were also mentioned, although price hikes of €65/tonne were representative of March and second quarter business combined.
One main manufacturer, however, had said it had rolled over its pure MDI prices in March in Europe. It had previously said its attempts to increase prices for margin reasons, were being weighed against lower than expected demand in parts of the Mediterranean for economic and political reasons.
To reflect some middle ground, pure MDI contract prices in March were assessed stable to €30/tonne firmer, taking values to €2,230-2,310/tonne FD W Europe, according to ICIS.
The MDI market is generally well-supplied, albeit with a few exceptions for pure MDI.
One producer had previously mentioned tight supply for pure MDI amid ongoing seasonally good demand in northwest Europe.
One pure MDI buyer in the Mediterranean said it has sufficient volumes, but suggested that any larger additional volumes are more difficult to obtain.
Crude MDI demand in the downstream construction sector has been relatively healthy during the first quarter in northwest Europe and is expected to increase further, as it typically enters into high season in the second quarter.
However, one consumer noted that while demand is good from a weather related perspective, ongoing economic constraints in parts of Europe continues to limit construction activity to some extent.
Pure MDI consumption is generally holding up well for the time of year, albeit with some muted activity in parts of southern Europe for political and economic reasons. In fact, one buyer in the Mediterranean said its demand is good and remains in line with the same period last year.
One trader suggested there is likely to be a delayed seasonal slowdown this year, expecting the market to quieten down in the second half of April, to coincide with the Easter holidays in Europe.
Pure MDI activity in the downstream footwear sector traditionally enters into low season at the end of the first quarter/early second quarter.
However, the Easter holidays in Europe could delay the seasonal softening to some extent.