Asia MMA at 25-month low; declines to slow down on US supply woes

Source: ICIS News

2019/04/15

SINGAPORE (ICIS)--Asia’s methyl methacrylate (MMA) spot prices are at their lowest in more than two years and are likely to remain under pressure on rocky regional fundamentals.

A building with iridescent surface coating. MMA is used in the manufacture of polymethyl methacrylate (PMMA), acrylic sheets, surface coatings, emulsion polymers and adhesives. (Photo by Rudi Sebastian/imageBROKER/REX/Shutterstock)

But further declines could happen at a curbed pace on external supply woes.

Across the past seven months, market prices have shrunk by nearly 30% or more than $750/tonne, ICIS data indicated.

For the week ended on 12 April, regional MMA prices for small parcels of 20-300 tonnes averaged at $2,100/tonne CFR (cost and freight) SE (southeast) Asia, steady for two successive weeks, according to ICIS data.

Spot values for bulk cargoes of 500 tonnes or more, likewise, stayed unchanged at $2,000/tonne CFR SE Asia/Taiwan/South Korea over the same period, the data showed.

The prices are at their lowest since February 2017.

REBOUND UNLIKELY IN NEAR TERM

Industry players are mostly sticking to a wait-and-see stance amid gradual changes in the global supply-demand balance, as well as economic uncertainties brought about by general elections in southeast Asia, and the prolonged US-China trade negotiations.

Regional buyers increasingly seek shorter shipment periods and prefer to take prompt cargoes in their respective markets, in view of the current downside for spot prices.

“My customers [in southeast Asia] are requesting for local deliveries in a few days, and I am focusing first on orders that allow me to have an advantage, factoring in the location of my MMA storage area,” a trader said.

Emulsion users will continue to secure small volumes for existing orders, while cast sheet makers are likely to rely on contract cargoes and monitor the spot situation further.

ASIA SUPPLY BEING HIT BY US DISRUPTION

Availability of cargoes in the region is seen as slightly mixed on sustained supply troubles outside Asia. Increased interest in Asian volumes has emerged from other regions such as Oceania, owing to the ongoing production disruptions in the US.

As the outage at Lucite’s Beaumont facility in the US continues, some cargoes from the Middle East are also expected to be diverted there instead of China.

Separately, the recent tank fire at Intercontinental Terminals Company (ITC) is said to be affecting export arrangements for US Dow Chemical and customers may take required volumes from Asia instead.

A few Asian suppliers stayed on the sidelines and maintained April offers, as inventories are largely at comfortable levels due to ongoing production control and prior spot sales.

Some manufacturing units have resumed or switched to higher operating rates amid expectations of stronger downstream appetite in the second quarter, following earlier turnarounds and production adjustments.

Meanwhile, the restart of several facilities after planned and unplanned shutdowns in late March would provide some supply counterbalance for the region.

EYES ON CHINA MARKETS FOR DIRECTION

In the key China market, domestic MMA prices have been on an uptrend since March on decent demand, halting broad declines seen since August 2018.

There appears to be limited downward pressure on local spot prices, even as China’s value-added tax (VAT) cut came into effect on 1 April.

Spot ex-tank values in east China stood at yuan (CNY) 14,250/tonne ($2,124/tonne) on 12 April, after gaining CNY250/tonne  over a month, according to ICIS data.

Similarly, market prices in south China were pegged at CNY14,950/tonne DEL (delivered) on average, representing a CNY100/tonne increase in the same period.

Although the performance of Chinese markets typically influences regional sentiment, it may prove challenging for others in Asia to mirror this price trend for now.

“The slight gains in China would not generate enough lift for Asia. More importantly, Asian prices need to maintain some stability first [on improved fundamentals] before we can talk about prices potentially rebounding here,” a second trader said, referring to southeast Asia.

In China, heightened safety inspections from the authorities are likely to be conducted on manufacturing facilities in light of recent deadly explosions at chemical plants in Jiangsu province.

Stringent regulations at some ports would also slow down the arrival of imports.

Focus article by Loy Kheng Wee

($1 = CNY6.71)

Additional reporting by Yiting Tang

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