MDI manufacturers are targeting price hikes of €100-150/tonne for March/April, depending on contract duration
European methyl di-p-phenylene isocyanate (MDI) contract prices are likely to firm in March based on the uptrend in the benzene contract price over the last few months and sellers’ need for margin recovery, said market players on 25 February.
Robust demand, particularly for crude MDI, is also expected to push up prices. European MDI manufacturers are targeting price hikes of €100-150/tonne for March/April, depending on contract duration.
An upturn in construction activity is expected
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MDI sellers remain firm on their price hike targets for March/Q2 based on recent increases that still need to be recouped, irrespective of the heightened volatility in benzene spot levels.
Benzene spot offers were reported the week ended 21 February as high as $1,500/tonne CIF (cost, insurance & freight) ARA (Amsterdam-Rotterdam-Antwerp) and a deal done at $1,480/tonne CIF for prompt in February, but benzene spot was trading on 25 February close to around $1,400/tonne CIF ARA for March.
MDI sellers said demand for crude MDI has also been better than expected due to mild winter conditions in most parts of Europe.
One manufacturer said it is also optimistic demand will continue to improve, which it attributes to some economic recovery in certain countries in Europe and the expected onset of high season in the downstream building sector as spring approaches.
Another producer said it has already implemented price increases of €30-50/tonne for some of its monthly MDI business in March.
It said it would look to achieve an overall target of plus €150/tonne for March and April business combined, noting it would look to pass on hikes of €100-120/tonne for monthly accounts in April and for the full target increase of €150/tonne for quarterly accounts as of April.
A second supplier said it is looking to raise MDI prices by €100/tonne in March and that it has already passed on rises of €50/tonne for a few crude MDI accounts so far, while discussions are still ongoing with other players.
It said it sees MDI increases for monthly business in March as sending “a signal to the market about the positive trend in demand especially for crude MDI” as well as the need to recoup margin losses and to prepare the way for proposed increases for the second quarter.
The same source said it had not yet defined its price increase target for Q2 MDI business and would continue to monitor demand and feedstock developments.
BUYERS SEE SMALLER GAINS
Buying sources consider price targets of three digits overly ambitious but do expect some upward price movement in March. One buyer, however, noted some sellers are being more bullish than others in their price targets, with some more open to two-digit rather than three-digit price increases.
One customer said it had already agreed to price rises of €30-40/tonne for its monthly crude MDI business in March. Other buying sources consider an upward price move of €30-50/tonne may be likely, with one customer suggesting that an overall plus €80/tonne may be realistic for monthly March and April business combined.
Some quarterly contract customers said it is still too early to have clear price indications for crude MDI in the second quarter, but they did not consider targets of plus €150/tonne to be unrealistic, stating this could not be accepted or passed on into the downstream market amid strong competition.
In addition, buyers maintain the extent of any possible upward price move is likely to be moderated by good MDI supply and demand.
A few buyers said price rises of €50-100/tonne as a maximum may be possible for crude MDI in the second quarter, taking into account some higher feed cost pressure, but said this will also depend on how firm producers on their price initiatives.
Another consumer, however, expected any possible upward price move in the second quarter to be limited, if at all, amid plentiful supply and what it considered to be modest demand and import competition.
European MDI contract prices in February were assessed steady at €2,020-2,100/tonne FD (free delivered) NWE (northwest Europe) for crude MDI and €2,230-2.280/tonne FD NWE for pure MDI, according to ICIS. Price increases were also mentioned by a few sellers, but it was not seen to be the general market trend.