Chemical Profile: Europe maleic anhydride

04 July 2014 10:13 Source:ICIS Chemical Business

Maleic anhydride (MA) is mostly used in the manufacture of unsaturated polyesters resins (UPRs), which are used in a wide range of applications, including pleasure boats, bathroom fixtures, automobiles, tanks and pipes.

Other outlets for MA include 1,4- butinediol (BDO), tetrahydrofuran (THF) and gamma-butyrolactone (GBL).

MA is available in liquid (molten) and solid (flake) forms: liquid is by far the larger market, accounting for around 90-95% of all material sold.

The European MA market has been short to balanced in the last couple of months. Demand for MA has been stable in the first half of 2014. There is largely sufficient supply of the material, but any production or transportation disruption tightens the spot market and can push prices up.

Additional volumes have been difficult to find. This is partially a result of decreasing imports of US material, mostly due to a number of production issues and turnarounds that took place in the US in the first half of 2014.

Separately, a few European producers have recently been through turnarounds or have experienced production problems.

Two producers located in southern and central Europe are preparing for large turnarounds in August. But this is not supposed to have a huge effect on the market balance as normally demand in August slows down due to summer holidays, especially in southern Europe.

In May, second-quarter European MA contract prices rolled over and increased from the first quarter, depending on starting point. Prices were assessed at €1,770-1,850/tonne FD.

Suppliers said prices had increased on tighter supply mostly as a result of a planned shutdown at a central European producer in the second half of May.

Other reasons quoted for tighter supply included a notable lack of imports from the US, higher costs of Asian feedstock benzene and good orders for downstream unsaturated polyester resin (UPR).

Negotiations for Q3 contracts are not expected to conclude before the end of July. Producers have started pushing for price increases of up to 10% mostly on the back of the two producers going through extensive turnarounds in August, limited imports of US material and increasing crude oil prices.

Buyers strongly disagree with the proposed price increases and are pushing for a rollover, saying there is largely sufficient supply and there will be limited activity in August, owing to summer holidays.

MA spot prices went up in June as a result of limited spot volumes of the material. MA shortages were largely attributed to production disruptions at a major central European supplier.

Spot prices for liquid MA were assessed at €1550-1620/tonne for liquid and €1780-1820/tonne in the week ending 27 June 2014.

MA is produced commercially by the oxidation of benzene or butane. The butane-based process is considered to have superior economics and is the preferred route used by most producers.

Butane-based MA production can be done by either the fixed-bed or fluidized-bed processes.

The fluid-bed process has some advantages over the fixed-bed route, such as lower air-to-hydrocarbon concentration in the feedstock and no need for premixing. The disadvantages include abrasion of the catalyst, conversion rates and by-product formation.

In the fixed-bed route, air is mixed with superheated butane and fed to a reactor containing a catalyst that consists of vanadium phosphorous oxide supported on silica.

MA market players are optimistic that the market will remain stable for the foreseeable future.

Imports from the US and Asia are not expected to pick up drastically with some estimating it to account for a maximum of 10% of the material used in Europe. Local producers are believed to have enough capacity to cover the total needs of the EU market.

After several years of shrinking demand in UPRs as a result of slow growth economy rate, there is hope Europe’s UPR demand will increase at least by 2%.

Benzene prices are expected to stay high, which according to some will force the only European supplier still producing MA from benzene to either exit or further reduce its benzene-based production.

Conflicts in Iraq have driven up crude oil prices which will affect the prices of the MA raw materials and increase production costs. Producers are already pushing for increases of 10% but some see such a price jump as unrealistic and expect prices to go up by 3-4% or €50-100/tonne instead.

By Yana Palagacheva