Europe July flexible polyol prices firm on tighter supply

09 July 2014 23:59 Source:ICIS News

LONDON (ICIS)--European flexible polyol monthly contract prices have largely risen for July on the back of lower availability, resulting from the Shell/BASF joint venture SM (styrene monomer)/upstream PO (propylene oxide) plant disruption at Moerdijk, in the Netherlands, said market players on Wednesday.

Sellers’ need for margin recovery was also a driver behind upward price movements in July, following the higher upstream propylene contract price over the last few months, which has eroded polyol margins.

Price rises of €50-70/tonne were mainly heard for July European slabstock conventional flexible polyols, but price rises of €30-60/tonne were considered most realistic, taking into account the absolute numbers quoted.

Standard flexible polyol prices were mainly heard at €1,780-1,800/tonne as a minimum in July, with values talked up to the high €1,800s/tonne FD.  

As a result, the flexible polyol range has been assessed in July at €1,780-1,870/tonne FD (free delivered) NWE (northwest Europe).

Rollovers and lower price increases of €10-20/tonne for flexible polyols in July and the third quarter, depending on contract type, were heard in a few cases, but they were seen to be exceptions rather than the norm.

By contrast, larger price hikes of €100/tonne for July were mentioned in some cases, although these were not seen to reflect the general market trend.

One buyer had previously said it had limited its price increases to €30-50/tonne for flexible polyols in July, stating that it had refused to accept offers of plus €100/tonne.

One producer, however, said it had secured price rises of up to €100/tonne in some cases, and had concluded its July flexible polyols business between €1,800-1,900/tonne FD. However, there was no other market confirmation to substantiate prices as high as €1,900/tonne FD.

The same source attributes the upward polyol price movement to supply constraints, stating that “Product is short because of [the] PO/SM Moerdijk situation - buyers have no other option.”  It added  that there are “more orders than we can supply, despite the summer holidays.”

Buyers acknowledged that price rises for flexible polyols have been possible in July because the upstream Moerdijk PO/SM plant disruption has mainly adversely affected polyols market sentiment, which has led to a bullish seller stance for margin recovery reasons.  

Buyers maintain however, that they have sufficient supply and do not see any real market tightness, despite the Moerdijk incident, on the back of lower demand from the main downstream bedding and furniture sectors during the summer holidays.

Rigid polyol contract prices for July and the third quarter are generally heard between rollovers and modest rises of €20-50/tonne and any price increases are largely incorporated within the existing range. To reflect this, the range remains steady in July at €1,970-2,030/tonne FD NWE. 

Players said that rigid polyols have been subject to less upward pressure than their flexible counterpart, because prices are higher and margins are better. 

It has also been suggested that the rigid polyol supply has been less affected by the upstream PO constraints at Moerdijk, because of feedstock content differences, as well as talk that some players are prioritising rigid polyol production, where flexibility allows, because it is economically attractive to do so.

Rigid polyol supply is generally sufficient, although one producer said that while there was no real immediate impact on polyols availability following incident. However, it suggested that there have been some effects on  rigid polyol supply since then, which it attributed to some existing stocks are being worked through. This view was not widely confirmed.

Rigid polyol demand into the downstream construction sector is being limited in parts of central Europe, because construction sector investment has been lower than expected. One customer in the Mediterranean had also previously mentioned that building activity was steady, albeit at a modest level, because of ongoing economic constraints.

A seasonal lull in construction activity is expected during July and August, the height of the summer holidays in most of Europe, with the exception of central Europe, which is traditionally less affected by the summer slowdown.

By Heidi Finch