Europe MDI February contracts largely steady, selective rises

12 February 2014 23:59 Source:ICIS News

LONDON (ICIS)--European methyl di-p-phenylene isocyanate (MDI) contract prices have largely remained steady in February despite some price increases, sources said on Wednesday.

February contract prices were steady assessed at €2,020-2,100/tonne FD (free delivered) WE (western Europe) for crude MDI and €2,230-2,280/tonne FD WE for pure MDI, according to ICIS.

Numbers were also heard either side of the range, but they were not widely confirmed.

Some selling and buying sources confirmed price rollovers for crude MDI in February, as increased upstream benzene cost pressure over the last few months was being weighed against good supply and reasonable demand, albeit in the context of low seasonality.

In addition, a number of crude MDI contracts were fixed for the quarter meaning that these prices would roll over into February, making it difficult to increase prices across the board.

Some suppliers said they had achieved price rises of €20-40/tonne in February, depending on grade, because of higher cost pressure and margin recovery, as well as  robust demand. However, there was insufficient market confirmation to substantiate this as a general market trend.  

One manufacturer conceded that it had been easier to implement price increases for pure MDI rather than crude MDI because of differences in seasonality and validity of contract types.

It said it had tried to increase its crude MDI prices by €50/tonne as a minimum, but had achieved plus €20-30/tonne, because the increase potential for crude MDI was being diluted by a number of quarterly contracts. While demand was good for the time of year, it was still lower than in the fourth quarter of 2013 for seasonal reasons and availability was ample, it added.

It said it had achieved larger price rises of €30-40/tonne for pure MDI in February on the back of rising raw material costs and the ability to adjust on a monthly basis, as well as seasonally-healthy demand. Pure MDI activity is typically in high season during the first few months of the year, in contrast to crude MDI. 

Another supplier said it had also increased its pure MDI prices by €35/tonne in February, but it said its prices remain largely within the range but had moved closer to the upper end.

Other buying and selling sources confirmed price rollovers for pure MDI, as higher raw material costs are being offset by satisfactory demand, but market conditions could be better in light of the season. The latter was being attributed to recent and ongoing economic and currency constraints in parts of the Mediterranean. There was some talk of competitive offers in southern Europe, although this was thought to be for imported origin and details on volumes was not forthcoming.  

One producer had said it had mainly kept its MDI prices steady in February, albeit with a few selective increases for crude MDI. It said it had already booked its MDI business in February ahead of news of the rise in benzene February contract price settlement. However, it is likely to push for higher prices in March for margin reasons, although it said it is too early to disclose a precise target.

Other suppliers are also looking to raise prices with effect from March or April, depending on contract type, with target hikes of around €150/tonne being heard. Huntsman has announced its intention to raise prices by this magnitude as of 1 March or as contracts allow, on the back of the need to recoup lost margins in view of higher raw material, transportation and energy costs and to achieve re-investment economics. 

Some buying sources said they were not yet aware of these targets and had not yet started discussions. Other customers  considered these proposed hikes overly ambitious and some said that any upward price move may be likely, but not to that extent, although they said this will depend on how firm the producers are in their stance. 

One main buyer had said it did not rule out the possibility of an upward price move for crude MDI over the next few months if benzene costs remain firm, as demand for crude MDI in the downstream construction sector is expected to move into high season in the spring.
By Heidi Finch