OUTLOOK 18’: Europe PMMA concerns mount on shortage, robust demand

LONDON (ICIS)–Concerns in the European polymethyl methacrylate (PMMA) market are mounting for 2018 after the crippling supply shortage that gripped the market throughout 2017.

Robust demand is set to add to supply constraints.

2017 was an unprecedented year in the PMMA market, driven by upstream global methyl methacrylate (MMA) tightness.

European PMMA prices increased by 34% last year, with further triple-digit increases being discussed for the first-quarter contracts for 2018.

The extreme MMA shortage has altered the makeup of the downstream market, with contract terms changing and some buyers leaving the market for supply security.

This is expected to continue into 2018, with both MMA and PMMA expected to remain unbalanced for at least the first half of the year.

The monthly European MMA contract rose 67% between January and November, significantly increasing costs for PMMA producers.

A numbers of quarterly contracts were changed to monthly, and even the large automotive players had to compromise to quarterly contracts from six-monthly.

Although the vast majority of business is still on a quarterly basis, shorter-term contracts will remain a factor in the market until supply rebalances.

With MMA prices now at an historical high, many PMMA players are questioning if 2018 will show an improvement, and how long can the shortage continue before it has long-term damage on the sector.

Some PMMA buyers have had no choice but to seek alternatives, with PMMA lead times lengthening and producer focusing on strategic customers.

Polycarbonate (PC) is the main substitution, but with polyethylene terephthalate-glycol (PETG) also making gains as prices for the latter are much lower than current PMMA prices.

However, many buyers do not have the flexibility to use other plastics, with strict approvals in place in the automotive and medicals sectors.

While many of the buyers are expected to return to the PMMA market when supply eases, there are some that are expected to continue to use other sheets, reducing future growth in the sector for some.

However, given the current issues in the market this is not a high concern for sellers, who are focused on trying to meet the current demand in the market.

Demand for 2018 is expected to be robust, with double-digit growth expected from the automotive sector and lighting applications also expected to grow healthily.

Overall demand is expected to grow above the level of GDP, but there will be some applications that are expected to significantly outperform this.

As the automotive sector continues a shift toward lightweight vehicles, then the demand for PMMA continues to grow.

Producers continue to develop methods to increase the impact-resistance for PMMA, which means it can be used in more parts of a vehicle, including bumpers.

There is also further opportunities in the construction sector, with replacement lighting also an area of growth for next year.

The main concern, especially after a year of global shortage, is whether there will be the material to meet the growth in the industry.

Players are eagerly awaiting new capacity in the Middle East, with delays in the plants this year, and production now expected online in the first half of 2018.

There will be an additional 40,000 tonne/year expected additional PMMA capacity online for Saudi Methacrylates, along with MMA facility in the later commissioning phase in late December.

The 250,000 tonne/year MMA plant is a joint venture between Mitsubishi Rayon (MCR) and newcomer to the market SABIC.

There will also be an additional 50,000 tonne/year PMMA facility for Petro Rabigh, with the 90,000 tonne/year MMA plant expected on line in the first half of 2018. Petro Rabigh, the joint venture between Japan’s Sumitomo Chemical and state-owned energy firm Saudi Aramco, with a number of delays for the project.

The fresh product will help to boost the global supply. However, with further turnarounds supply is still expected to be the main area of unease for 2018.

There is a major stoppage for Lucite International at its 200,000 tonne/year MMA facility in Cassel, UK. The overhaul will take place at the end of the first quarter, and is expected to take approximately two months.

There will also be a series of upstream MMA stoppages in Asia next year, which is likely to impact the flow of PMMA to Europe.

Imports have been at a low level for the bulk of 2017, with buyers also unable to pay the higher prices for Asian product.

There are worries over margins for buyers, as many have been unable to pass on the sharp increases, with prices with customers fixed on an annual basis.

Buyers in the extruded sheet sector in particular are citing poor and in some cases negative margins, with PMMA prices at their current level.

In the long term, the current price level for MMA is not seen as sustainable, with prices at an all-time high.

However, prices are also not expected to fall to the lows of 2016, as it the low margins of this time that in part led to the series of production outages this year, with a lack of investment in facilities.

For now, it will be a short start to the year, with demand expected to start firmly as players look to restock inventory.

Although the second half of 2018 may bring relief to the market, turbulence is expected until then, as players battle with further outages and strong demand.

By Katherine Sale