US Jan acrylates pricing outcome still foggy

Focus article by Larry Terry

HOUSTON (ICIS)–The outcome of US January acrylic acid and acrylates esters contract-price negotiations is as foggy as those famous days in London, with sellers insisting their price-hike efforts are succeeding while some rollovers and weakness have been confirmed.

What makes this month unusual is that there are market conditions to support both scenarios.

For January, Dow Chemical and Arkema proposed separate increases of 6 cents/lb, despite a 4 cent/lb drop in December’s feedstock propylene contract. The initiatives also surfaced during what is usually the weakest demand period of the year.

BASF sought no acrylates increases at all for January.

A rollover in December held glacial acrylic acid (GAA) contract  prices, for example, flat at 86-90 cents/lb FD (free delivered), as assessed by ICIS.

Buyers attributed the January price efforts from Arkema and Dow to margin expansion, but both producers have described demand as unusually strong for this time of year, further tapping already constrained volume.

Some sellers say supply is tight, and both Dow Chemical and BASF have issued 100% sales controls on some or all of their acrylates. Arkema and supplier Sasol say they are also closely monitoring supply levels or dealing with shortages.

Several factors have contributed to current tightness in the acrylates markets, sources said this week.

The BASF accident at its Ludwigshafen plant in Germany in mid-October was a major catalyst. Also, Asian market recovery has heightened demand there and led to some Asian suppliers pulling back product from US markets, increasing the demand most US producers have been reporting, a source said.

The US also has seen steady growth rates, ongoing operational issues, and the effects of Dow’s 20% capacity rationalization, which was effected nearly a year ago, but is being felt now amid the other market anomalies, a source said.

Globally, demand will continue to catch up with supply as the spring coatings season approaches, the source added.

A couple of buyers, however, see supply as ample, and demand at typical levels for this time of year.

“Supply is fine, regardless what they say about demand being strong and (regardless of) producers’ sales control implementations, a customer said. “I’m not having difficulty getting product.”

In the meantime, all the major US acrylic acid and acrylates suppliers have separately announced plans to increase their acrylates prices sharply for February.

February price direction is not in question, but the magnitude of expected gains will remain uncertain until January propylene settles. Olefins sources say that may not happen until the very end of the month.

Propylene producers recently were said to be seeking January contract gains of 10-12 cents/lb, while olefins buyers seemed willing to accept gains of only 5-7 cents/lb.

Arkema is seeking acrylates increases of 10 cents/lb ($220/tonne); Dow Chemical is seeking 8 cents/lb; BASF plans to increase prices by 8 cents/lb, as does Sasol for the ethyl-A and butyl-A it exports to the US from South Africa.

All of the initiatives stipulated effective dates of 1 February.

For now, buyers and sellers are both closely watching January propylene negotiations.

A buyer said, however, that without a 10 cent/lb or higher increase in January propylene, the February acrylates initiatives are just “wishful thinking.”