Price and market trends: Big gap in Europe July polyols price ideas

04 July 2014 10:13 Source:ICIS Chemical Business

Targets of plus €100/tonne are being discussed by suppliers on tight PO supply stemming from the Moerdijk blast

Views vary significantly on European polyols availability and price ideas for July, as upstream supply and logistical constraints for certain players and sellers’ needs for margin recovery are being weighed against some slowdown in activity during the summer, according to market players on 24 June.

Some sellers maintain that European polyols supply has tightened because of the explosion at BASF’s and Shell’s upstream joint venture SM (styrene monomer)/PO (propylene oxide) (MSPO-2) plant in Moerdijk, the Netherlands, that took place earlier in June. PO is a main feedstock for polyols.

Some polyol suppliers said they have struggled to accommodate a number of additional enquiries and orders from non-regular customers during June and for July, which they suggest is the knock-on effect of 250,000 tonnes/year nameplate capacity of PO feedstock at Moerdijk being removed from the European market.

Some polyol sellers have estimated this equates to around a 1:1 ratio for PO to polyols in Europe, although one supplier suggests that the ratio of PO to polyols is more than this, depending on grade.

BASF declared force majeure on PO from Moerdijk on 4 June, a day after the explosion caused significant damage to the plant. A BASF spokesperson said polyols were not under force majeure from Moerdijk and it was continuing to supply customers in Europe, the Middle East and Africa from its global supply network. Shell, however, declined to comment on its PO or polyols supply status.

One polyols supplier said it is not only the Moerdijk incident that is affecting downstream supply, but also other recent weather related logistical constraints for ethylene oxide (EO), which is also another feedstock for polyols, depending on the grade.

It said polyols stocks are limited for certain players and sellers will only be prepared to place their volumes selectively for those who are prepared to pay the higher price.

Sellers are pushing for higher prices for polyols in July, citing upstream supply constraints and the urgent need for margin recovery, following propylene contract price increases since the start of the year, which have not been passed on as the main reasons for this. Targets of plus €100/tonne were being discussed.

One supplier said it is confident that plus €100/tonne is likely to be achieved for both flexible and rigid grades in July, stating that “polyol suppliers have been on their knees for the last six to twelve months [from a margin perspective]. It would be ridiculous not to try for increases with the upstream supply constraints – not riding on a margin, zero margin.

The same selling source said it will be particularly firm if bi-monthly contracts for July-August are being discussed to cover the summer holiday period in Europe.

Another seller said it is firm on a three-digit price hike for polyols in July, stating it has already booked some business at close to plus €100/tonne, expecting limited change in the propylene contract price for July. There was, however, no buyer confirmation for price increases in July.

A number of polyol buyers said they had either not seen any impact on polyol supply for either flexible or rigid grades, despite the Shell/BASF Moerdijk PO constraints – or if they had, it was limited and manageable.

One main buyer said it has not seen any adverse effects on European polyol supply, stating that the reduction in [flexible polyols] demand is greater than the reduction in upstream PO availability.

The same source said that downstream polyols demand into the main bedding and furniture sectors is seasonally low, and the automotive is expected to slow during the summer holidays as well. It also said the Moerdijk disruption has sufficiently been covered by others.

The same buyer said it would strongly resist any sizeable price increase in July, but would be prepared to compromise with a modest increase, acknowledging higher propylene costs.

Some other buyers of different volume sizes said they had had not experienced any supply difficulties for either flexible or rigid polyols grades for June and even in July in some cases.

One buyer said it has already secured its third-quarter flexible and rigid polyol prices at a rollover or with a modest increase. Another specialty rigid polyols customer said it has booked its third-quarter price at a rollover.

One flexible polyols customer, however, acknowledged that the market is tightening, because of a mix of upstream output and logistical constraints.

It reluctantly conceded that polyol prices are likely to move up in July, stating that upstream supply constraints are likely to be the overriding factor.

Other buying and selling sources however, acknowledge that the outcome of the July propylene contract price settlement could limit the upward price potential for polyols.

One buyer concedes that polyols prices are likely to increase in July for flexible and rigid polyols. It said that it expects plus €50-70/tonne, if July propylene costs remain firm. But if they move in the other direction, it suggested that this is likely to limit any price increases for polyols to €10-20/tonne in July.

One polyols seller said it is hopeful of a high double-digit price rise for polyols in July. However, it said that rises may be limited to plus €30-40/tonne if the July propylene contract were to fall. This would apply particularly to flexible polyols.

European polyol contract prices in June were assessed at €1,750-1,810/tonne FD (free delivered) NWE (northwest Europe) for slabstock flexible 
polyols and €1,970-2,030/tonne FD NWE for sucrose base rigid polyols.

This represented a decrease of €10-20/tonne from May. Rollovers were also heard, but in terms of absolute numbers, prices were generally quoted lower.

By Heidi Finch