AFPM ’14: US acrylates challenged, but seasonal uptick anticipated

30 March 2014 02:08 Source:ICIS News

HOUSTON (ICIS)--US acrylic acid and acrylate esters, like other markets closely linked to construction and coatings, has been challenged by persistently harsh winter weather in the northeast, but participants are mostly hopeful about near-term demand.

While non-cyclical downstream segments such as adhesives, water treatment and super-absorbent polymers are reporting steady, albeit low-key demand, coatings customers are anticipating the “seasonal bump”, tentative though it appears so far.

Although memories of the severely delayed spring 2013 coatings season are still fresh on the collective mind, some players were optimistic heading into this year’s International Petrochemical Conference (IPC), even if their reasons vary.

“It’s not the weather that’s holding back the economy,” a buyer said. “It’s pockets of the economy. If people say the economy is bad, it tends to be bad – a self-fulfilling prophecy.”

The market will see residual demand from insurance-related rebuilding stemming from the devastating storms of 2013 after the winter of 2014 is over, the buyer added.

“That is going to happen. Reconstruction will take place on the other side of this. There’s always a reason for hope,” the customer said. “The amount of damage that was and is being done to residences will need to be repaired. That is pent-up demand.”

Others are less positive.

“The market is long, demand is weak and spot prices are low and disconnected from contracts,” another customer said. And yet another customer said that overall glacial acrylic acid (GAA) is strong, but that downward price pressure is still in play.

But on one point there is consensus.

“Until we get some kind of clear direction and reason for homeowners to buy homes or renovate, there’s no way to justify the view that the recovery is here to stay,” a buyer said. “The recovery is so tentative right now; that’s the problem.”

“There’s not enough ground-breaking going on to drive demand, so much of it is or will be storm-damage repair – not reflective of a healthy economy – as would be housing starts and other new construction.

Downstream signals are somewhat mixed.

In spite of some recent positive housing numbers, US sales of new single-family homes fell by 3.3% in February from January, the Commerce Department recently reported.

Last month’s selling pace also was 1.1% below activity seen in February 2013. The recent decline partly offset a sharp 9.6% gain recorded in January, which had ended two months of declines, including a 7% drop in December.

Domestic contract GAA for March is in a range of $1.09-1.13/lb ($2,403-2,491/tonne), as assessed by ICIS.

Major US acrylates suppliers include Arkema, Dow Chemical, BASF and Sasol.

Hosted by the American Fuel & Petrochemical Manufacturers (AFPM), the IPC takes place 30 March through 1 April in San Antonio, Texas.

By Larry Terry