Europe methylene chloride prices set to firm in Feb on low margins

04 February 2014 17:03 Source:ICIS News

LONDON (ICIS)--The European methylene chloride spot market is set to firm, producers said on Tuesday, on the back of low production margins and historically low caustic soda prices.

A price increase would likely push the spot market to its highest levels in six months, according to ICIS data.

Chlorine and caustic soda are co-products in the electrolysis process, and methylene chloride is a derivative of chlorine. According to ICIS data, caustic soda prices are at their lowest levels since October 2010 and methylene chloride prices remain at a four year low despite recent - albeit modest - increases.

“I am finally hearing some positive responses from the market,” a producer said about proposed price increases. “The pressure has been built with low profits and margins, caustic soda prices [also] fell in [the first-quarter]. We are walking away from business which does not include [any] increases, the next 10 days will be the defining period. I am optimistic”

The producer was unable to quote, in absolute numbers, the prices it is expecting in February, saying it was too early in the month for the specifics to be settled and negotiations are ongoing.

A distributor said it had been informed of increases up to €20/tonne by one producer, but a second producer is keeping prices stable in February. Its current price range, reflective of January business, is €470-500/tonne FD (free-delivered) northwest Europe (NWE) which is largely within the current range.

There is a risk that sellers who insist on increases will lose market share, a buyer warned.

“We already have problems being competitive [in our end-use sectors] at this [current] price,” the buyer said, “I think they [sellers] will complain about lower volumes if they do raise the price.”

Prices remain unchanged pending further market feedback on February negotiations. The current spot price range, settled on January 28, remains stable at €480-520/tonne FD NWE.

By Stefan Naidu