Europe acrylate spot levels ‘disastrous’; 2012 outlook unclear

LONDON (ICIS)–Weak demand and aggressive offers in the spot market are pulling down European acrylate prices as the year draws to a close, sources said on Monday.

A €55/tonne ($74/tonne) reduction for feedstock propylene in November added some downward pressure to the market, but players largely agreed that the key factor is the combination of current downstream bearishness with low spot numbers.

“It is the distribution side of the business that is bringing the price levels down,” said one producer. “There are a lot of sources in the market now that we have not seen in the last 18 months.”

While it is usually competitively priced material from Asia that makes its way into Europe, both buyers and sellers confirmed that material from Russia was currently the key driver behind the lower numbers.

Other players felt that a generally bearish sentiment amongst traders was forcing them to destock, which was in turn leading to lower prices, in particular for ethyl acrylate and butyl acrylate.

“Spot numbers are disastrous right now,” said another European supplier, adding that this was leading to a wide range of November contract prices.

“Some BA contracts have come down in line with spot levels, so we are seeing some numbers in the €1,500s/tonne, although these are not representative of the market as a whole. The majority of business is settling around €1,800-1,900/tonne.”

However, with demand currently very soft, buyers say that the market has been fairly inactive – despite the lower prices being reported.

With no firm buyer interest expected for December and the wider economic picture keeping the outlook for the near future uncertain, many downstream players are electing to run inventories down ahead of year-end.

“There is no real demand for November or December,” said one seller. “We will see a sharp upturn in pricing when buyer interest picks up, however.”

A major consumer agreed, adding that the current squeeze on margins for producers would be unsustainable before too long.

But it remains uncertain when this uptick in demand will be seen. January usually sees a swell of buyer activity due to inventory restocking, but 2012 could prove different.

“The wider economic uncertainty will influence demand,” said one producer. “The global situation is having a tremendous effect.”

Another seller added that low inventories and a shortage of material in the new year could led to more volatility on pricing.

“Demand could spike, and with no real inventory built up by then we could see more of this yo-yo effect with prices,” the seller explained.

“But the outlook is very unclear. There are too many parameters, and everything is changing. Nobody really wants to make predictions at all.”

($1 = €0.74)

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