OUTLOOK ’18: Asia MMA markets may soften in H1 amid growing supply

SINGAPORE (ICIS)–Asia’s methyl methacrylate (MMA) spot markets may soften in the first half of 2018 amid growing supply and stable demand.

MMA spot prices have been on an uptrend for the past year, on the back of a prolonged supply shortage caused by various planned and unplanned turnarounds around the region.

Regional MMA prices for small cargoes of 20-300 tonnes were assessed at $2,700/tonne CFR (cost and freight) SE (southeast) Asia on 15 December, around 37% higher compared with levels at the start of 2017, according to ICIS data.

Minor plant troubles in Asia, together with recent force majeures in Europe and US, kept the spot market supported. Trades for bulk cargoes were highly limited.

Most market participants expect the supply shortage in the MMA market to ease, with the start-up of several new plants in Asia.

A new 250,000 tonne/year facility in Saudi Arabia, belonging to Saudi Methacrylates Company (SAMAC), was heard to have started MMA production in November.

Separately, a 90,000 tonne/year plant in Saudi Arabia, operated by Petro Rabigh, is likely to commence production sometime in the first half of 2018, according to sources.

With production underway in 2018 for these plants, fresh MMA volumes are likely to flow to the Asian market, sources said.

“This will cause the supply tightness to go away and prices should start to drop… It is unlikely that the market will crash. Rather, it will be on a gradual basis,” a producer said.

However, it remains unclear when MMA volumes from the new plants will be fully ready for commercial sales, in terms of meeting customers’ specifications.

“The time needed [for ensuring the product is ready] will depend on the production route and feedstock involved. Customers would also want the material and colour to be on-spec,” a producer in northeast Asia said.

While overall production would have expanded, the impact on the spot market may not occur as rapidly.

For many producers, there is a need to replenish inventories, which have been at unhealthy levels for most of the year.

For producers with operations in other parts of the world, there is a chance that some volumes may be transferred out of Asia to meet contractual obligations or plug the supply gap.

“The MMA may be used for settling prior backlogs [in other regions], or for captive purposes, such as making polymethyl methacrylate (PMMA),” a trader said, since the new facilities in Saudi Arabia have downstream PMMA units.

If this happens, spot supply in Asia could increase at a slower rate.

On the buying front, consumers were watching the MMA market closely and carefully, especially during the year-end contract discussions.

On one hand, some consumers were considering to reduce their inventories towards the end of December and mid-February for accounting purposes.

On the other, some buyers were procuring goods only when necessary, in order to fulfil orders by their existing customers.

“When new volumes come from the Middle East, I believe prices would be softer,” a buyer said.

The rise in spot supply will probably happen in the first portion of 2018, assuming no further major supply disruptions occur within the region, according to most market players.

MMA production capacity will also expand in China, where three new plants are in the works.

A new plant in Shandong, China, has recently produced on-spec MMA, while another new plant in Shandong is expected to start up towards the end of the year, according to sources. Each has a capacity of 50,000 tonnes/year.

A third 50,000 tonne/year MMA plant is scheduled to complete construction in the second half of 2018.

The new plants are likely to provide some relief to the Chinese market, where lowered production of recycled MMA and strong overall MMA demand are pushing prices up, according to some sources.

Downstream PMMA prices are generally expected to move in tandem with MMA price trends.

Spot prices for general purpose (GP)-grade PMMA in Asia were assessed on 21 December at $2,850/tonne CFR SE Asia, around 37% higher than the $2,075/tonne CFR SE Asia at the start of 2017, ICIS data showed.

PMMA is used in the manufacture of automotive, household and electronic products, and is the largest downstream market of MMA.

MMA is used in the manufacture of polymethyl methacrylate (PMMA) polymer, acrylic sheets, surface coatings, emulsion polymers and adhesives.

Outlook article by Kheng Wee Loy