Europe butyl-A spot falls around 10% in 3 months on oversupply

14 August 2014 12:46 Source:ICIS News

Focus article by Helena Strathearn

LONDON (ICIS)--Abundant availability of butyl acrylate (butyl-A) has resulted in European spot prices falling by more than 10% in the past three months, and this has raised the question in the acrylates industry of how sustainable prices are at this level. 

Lengthening supply, steady to slightly softer demand, and an increasingly competitive market environment have resulted in average spot butyl-A price decreases of €170/tonne since the middle of May, when prices were at €1,480-1,550/tonne FD (free delivered).

Material is now trading at €1,320-1,370/tonne FD.

The period from March to September is traditionally the peak season for the sector as demand from the coatings and construction sectors is at its highest, although consumption levels during August are typically slower, owing to holidays.

It is rather surprising for some market participants that spot prices are around €130/tonne lower than they were during the year-end destocking in December 2013, and at the beginning of January, when offtake is seasonally low.

Indeed, market prices have not been as poor as they are now since March 2010.

Prices are significantly lower than they were one year ago when butyl-A spot reached a high of €1,750/tonne FD in early August 2013, because of supply constraints.

This followed BASF’s implementation of force majeure on butyl-A at its Ludwigshafen, Germany facility in June 2013, after which the producer had put its customers on sales control.

A general downtrend in pricing has been seen since August last year, although there was a brief recovery between March and May this year.

In contrast, feedstock propylene contract prices have largely trended upwards by over €100/tonne since summer 2013, leaving production margins severely squeezed.

Sources attribute the downward price pressure on butyl-A to increased global capacity, as well as a lack of European supply disruptions, along with demand that has failed to show the usual seasonal uptick.

The majority of butyl-A imports are coming from South Africa, Russia and South Korea, sources have said, with a couple of buyers indicating that spot offers are vastly below their contract prices.

There is some hope that September offtake will pick up after the summer lull, and it is seen as the market's "last chance" for any notable buying activity, but a few players said the market will not show any real improvement in demand for the rest of the year.

Overall demand has been reasonably flat since the end of March, although buying interest was better than expected in February, because of mild winter temperatures and as end users looked to undertake DIY and construction projects that had been delayed last year. 

A cold and wet spring, along with weak and uncertain macroeconomic conditions, had slowed coatings demand in 2013.  

The question of how sustainable the current pricing situation is continues to surface in the market.

A few players are asking if it will result in producers reducing output or mothballing a plant, but so far there are no indications that this is planned in Europe.

At least one seller has commented in the past week or so that plants might not function as healthily if investments in maintenance are lowered because of poor market performance, and ongoing raw material cost pressure.

Acrylate esters are used to make paints, coatings, textiles, adhesives, polishes and plastics.

The esters include methyl acrylate (methyl-A), ethyl acrylate (ethyl-A), butyl-A and 2-ethylhexyl acrylate (2-EHA).

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By Helena Strathearn