Global MMA operating rates slashed amid oversupply

LONDON (ICIS)–Operating rates at global methyl methacrylate (MMA) producers have been cut in order to manage the current oversupply.

In Asia, a series of heavy stoppages have been announced for February with producers bringing outages forward to cope with an abundance of product and weak demand.

There have also been numerous announcements of reduced rates, including Evonik’s plants in Germany, the Saudi Methacrylate (SAMAC) plant in Saudi Arabia and an array of plants in Asia.

Despite significant decreases in first-quarter and January contracts, there has been further downward pressure on February contracts.

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First-quarter MMA prices concluded at €2,260-2,290/tonne FD (free delivered) NWE (northwest Europe), a €150/tonne decrease on the low end and a €200/tonne decrease on the high end from the fourth quarter.

The January MMA contract settled at €2,495-2,515/tonne FD NWE, a €100/tonne decrease on the lower end and a €125/tonne decrease to the high end.

Economic uncertainty has also exacerbated poor sentiment in the global market with many viewing February as the true test of its overall health.

So far this year and throughout the fourth quarter, demand has been sluggish. This has been attributed to buyers awaiting further price decreases, a slowdown in the automotive sector, worries over Brexit and a general lack of consumer confidence.

Spot prices are currently stable following a €100/tonne drop last week. However, further price drops are expected in February when Asian imports, which were ordered in December, begin to arrive in the region.

Softness in underlying demand has resulted in limited activity on the spot market, with buyers receiving a high number of offers from traders.

It has also resulted in increased demand for prompt delivery because buyers are reluctant to commit to orders with longer lead times as they believe that prices could erode in the meantime.

Given this month’s production cuts in Asia, imports into Europe are likely to fall in mid-March, which should realign the global supply and demand balance.

Company	Location	Capacity (tonne/year)	Remarks
Saudi Methacrylates	Al Jubail, Saudi Arabia	250,000	To drop run rates in Feb; production adjustment
Shandong Hongxu	Shandong, China	75,000	Restarted in late Jan; maintenance
Lotte MCC	Yeosu, South Korea	90,000	C4 No 1: To shut 2 weeks in Mar
Mitsubishi Chemical	Otake, Japan	100,000	C4 No 1: To shut 4 months from Mar; planned maintenance, regulations C4 No 2: To shut 1 month from mid-Feb
Formosa Plastics Corp	Mailiao, Taiwan	98,000	To shut 1 month from mid-Feb
Lotte Chemical	Yeosu, South Korea	50,000	To shut 1 month from mid-Feb
Lucite International	Singapore	130,000	To shut 2 months from Feb; production control
Thai MMA	Map Ta Phut, Thailand	90,000	C4 No 2: Shut 20 days in Jan; planned maintenance
Petro Rabigh	Rabigh, Saudi Arabia	90,000	Target to restart H1 Jan; unplanned glitches
Huizhou MMA	Huizhou, China	90,000	Shut in early Jan; production adjustment

Any realignment will, however, depend on demand which remains weak from both the automotive and construction sectors. Coatings demand is normally lower at this time of year, although some coatings players saw consumption 10% lower than forecast in January.

Oversupply in the market is in stark contrast to the dynamics seen in recent years, with prices correcting from the historic highs hit in early 2018.

Longer-term price sustainability has been a key topic in the market for the last year, with many expecting continued downward pressure as global supply and demand dynamics ease.

However, prices are not expected to return to the lows of 2016 when underinvestment in the industry contributed to the severe outages experienced in 2017.

The cost basis has also increased since 2016, which would result in margins for producers being at an even lower levels than in 2016.

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There has been much debate over prices and whether they could fall to the €2,000/tonne level on the spot market, with some deals confirmed at this level last week.

However, the vast majority of sellers remain above this, and while lowers prices remain a possibility later this month, many deem the lower end of the range as more accurate for sellers who need to move volumes urgently.

Going forward, changes to the trade agreement between the EU and Japan could impact on the European market, with 0% duty on imports in effect from 1 February.

This is likely to shift trade flows, with higher exports from Japan and Asian sellers with multiple sites moving material from the country with the lowest duty with Europe.

Trade agreements with the EU are a hot topic at the moment because of the ongoing Brexit negotiations. Any outcome of this will certainly impact on Lucite International and its 200,000 tonne/year Cassel facility in the UK.

For some, the uncertainty surrounding Brexit is the main concern in the MMA market, with worries about supply a thing of the past for buyers.

Nearly all MMA is polymerised to make homopolymers and copolymers, the largest application being the casting, moulding or extrusion of PMMA or modified polymers.

Focus article by Katherine Sale

Picture source: Evonik