Europe MMA February contracts drop on looser supply fundamentals, middling demand

Author: Katherine Sale

2019/03/04

LONDON (ICIS)--European February methyl methacrylate (MMA) contracts have settled at a decrease on the back of looser global supply since mid-2018 and distinctly average demand.

The February MMA contract settled at €2,410-2,430/tonne FD (free delivered) NWE (northwest Europe), a €85/tonne decrease from January.

A wide range of decreases were agreed, ranging from moderate double-digit drops up to triple-digit falls.

MMA prices continue on their downward correction from historically high peaks at the start of 2018.

Prices soared from mid-2016 to the start of 2018, driven by global outages and solid demand, especially in parts of Asia, the US and Europe.

-

With the addition of new capacity in the Middle East and China, along with improved reliability globally, supply rebalanced in mid-2018.

As the position of power shifted in the market, purchasers also increased pressure by lowering consumption, and destocking inventory of finished goods.

With prices on a downward spiral, there was little incentive to purchase, with buyers sticking to minimal volumes.

Demand is traditionally lower in January and February, and caution from buyers, combined with slow automotive demand and a slowing European economic landscape made for a quiet start to the year in terms of consumption.

And, of course, no one can forget Brexit, which is a key topic for MMA players as large producer Lucite International is based in the UK.

As supply lengthened globally, with limited glimmer of short-term relief on the demand side, prices in Asia and Europe continued to fall significantly, with a €150-200/tonne drop in first-quarter contracts.

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

In the face of a supply glut, some production ceased in February, with a number of producers confirming lower operating rates, and scheduled maintenance stops brought forward in Asia.

Evonik’s Worms and Wesseling plants in Germany remain at a lower rate, with production initially lowered because of feedstock logistics on the River Rhine last year.

The logistics issues have eased, but operating rates remain around the 80% point.

MARKET SHIFTING
There are some early signs that the global market is starting to shift, moving towards an equilibrium in the coming months.

There have been a number of acrylonitrile (ACN) force majeure declarations from INEOS Nitriles, with facilities in Seal Sands in the UK, Dormagen in Germany and Green Lake, Texas in the US all experiencing issues.

The main production method for MMA globally is through acetone cyanohydrin (ACH), which accounts for over 60% of production.

This involves acetone and hydrogen cyanide (HCN), with the latter produced from ACN production.

While Lucite International, Evonik and Dow have all stated the ACN issues are not "immediately" impacting MMA, they have the potential to if the issues are not resolved.

MMA producers may be able to manage the problems for now, with stocks at a good level, and also alternative sources for some.

A fire at Unigel’s Candeias facility is also a factor that will likely reduce imports in Europe in a month’s time.

Although in isolation this would have limited impact on the region, the outage at Unigel's facility, combined with the other factors, is an element that could contribute to less length in the global market.

Coatings demand also traditionally picks up in late March, with some players prematurely excited by the unseasonably warm weather across Europe at the end of February.

However, while lower operating rates, hiccups upstream, and higher demand from coatings players have the ability to move the global balance, there are still some major concerns on the demand side.

Concerns over automotive demand continue to loom over the European markets and, with the majority of MMA going into the plastics sector, this has to be a potentially pivotal factor for the coming months.

General uncertainty over Brexit, the trade conflict between the US and China, and a slowdown in the economy continue to dampen consumer confidence.

There remains an argument over price, with many purchasers still holding back in pursuit of further drops, until prices reach what is deemed a more sustainable level from that side of the market.

There is also competition from other materials in the plastics sector, with significant drops seen for polycarbonate (PC), which rivals polymethyl methacrylate (PMMA) on some applications.


-
For now, the global MMA length continues. However, although a significant shift is not expected, there are some signs of readjustment in the market.

MMA has been a market of extremes in recent years, shifting from tightness to oversupply, with potential that it may experience some stability going forward.

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

Pictured: PMMA panels
Picture source: Evonik

Focus article by Katherine Sale