Europe acrylates sellers face stiff opposition to Feb price hikes

LONDON (ICIS)–European acrylic acid (AA) and acrylate esters buyers are resisting any proposed price hikes for February, despite healthy demand in January and firm upward pressure from feedstocks, sources said on Thursday.

With propylene expected to move up by as much as €100/tonne ($131.6/tonne) next month, acrylates producers are looking to pass on any increases in order to help restore margins.

“We are expecting propylene to go up by anywhere between €70–100/tonne,” said one major producer. “There is a lot of upward pressure for February, so we have to account for that.”

One acrylates supplier said it would be happy with prices moving back to where they were at November 2011: “This is realistic in today’s market.”

However, sellers have all said that they are meeting strong resistance to any planned price increases next month. One supplier said it had managed to achieve some “modest” increases, but there is still a lot of pressure for rollovers in February.

Despite an upturn in demand following a weak fourth quarter, January acrylates contracts largely rolled over.

There remains some uncertainty about whether the demand seen for January was indeed a structural improvement following what was deemed by some to be a “disastrous” fourth quarter, or if it was simply inventory restocking after the holiday season saw many players running tanks down to empty.

“It is still unclear on demand,” said one source. “It could be that buyers fill their pipelines and call it a day, or that the business is going to be real.”

It seems that February will be the real test for whether the market is showing signs of recovery, with the wider economic picture keeping most players apprehensive about any predictions beyond the immediate future.

One acrylates producer said that its January order volumes were strong and, in fact, above what it had previously forecast for the month. Consequently, it has less material available for February.

Several players noted that availability for AA in particular is looking increasingly restricted for the upcoming month, with one producer structurally tight and one major consumer purchasing more than usual in order to secure material in case of any future restrictions.

“Our February books are pretty full already,” one seller confirmed. “The demand certainly seems to be there.”

So how is the opposition to the proposed increases gaining traction? Several sources noted that there are still some low spot numbers being touted in the market, although the volumes involved are said to be negligible.

“Although we hear some low quotations, we realised that once you want to buy at this level, there is no more cargo available,” said one trader. “We doubt that products are long, and we believe that some molecules will be [tighter] within the next few weeks.”

Nevertheless, the lower numbers continue to make contract discussions difficult for sellers looking to pass on upstream costs, as they do give buyers some leverage during negotiations.

Additionally, sellers point out that there is still widespread malaise surrounding the macroeconomic picture.

“Even with healthy order volumes in January and February, what I hear in the market appears to contradict all this,” said one supplier. “The problem is that the market is still driven by sentiment.”

If the market sees an upturn in demand closer to the peak construction season, there might be a quick shift from a subdued marketplace to restricted availability and volatile price movements.

“The last thing we want is the yo-yo situation on pricing,” said another source. “It’s not good for the market, it’s not good for anyone.”

($1 = €0.76)

For more on acrylic acid and acrylate esters visit ICIS chemical intelligence
Follow me on Twitter for daily tweets on the acrylates markets