EPCA ’16: Europe MMA supply tight, but new ME capacity looms in 2017

02 October 2016 13:29 Source:ICIS News

Source: Monkey Business Images/REX/ShutterstockBUDAPEST (ICIS)--European methyl methacrylate supply is tight with many expecting this to remain the situation for the rest of 2016, but market players questioned what new Middle Eastern capacity in 2017 would bring, as players arrive in Budapest, Hungary, for the 50th annual European Petrochemicals Association Meeting.

Supply in Europe started tightening in April 2016, as the effects of shortness in Asia rippling across the globe.

Europe is a net importer of MMA and requires regular imports to boost the European supply balance.

A number of factors have led to European supply becoming tight, a major one happening in the fourth quarter of 2015. Fourth-quarter prices in 2015 fell by €220/tonne, a significant drop, which marked a turning point in Europe’s pricing position globally. Supply in the second half of 2015 lengthened, with imports from Asia, Brazil and the US being a key factor.

In the fourth quarter the market has traditionally seen an increase of imports, with producers thinking about end-of-year inventories. The steep drop in fourth-quarter contract prices resulted in Europe being priced less attractively for producers outside of the region.

This has led to imports being at a lower level for much of 2016, with firming prices in Asia from April 2016 further diverting volume away from Europe.

Imports from Asia fell, and imports from Brazil, although steady, remained at a lower level.

Dow Chemical then had a production problem at its Deer Park, Texas facility, starting in July and linked to force majeure being declared on an upstream feedstock. The producer is still running at reduced rates, according to sources and in a press release on 30 September said it had implemented 100% stock control on contracts. Imports from Dow are expected to remain at a lower level at least until the production problem is resolved.

This means with prices still firm in Asia, the production problem ongoing at Dow Chemical, and finally talk that Unigel has had to send supply from its Brazilian plant to its Mexican facility because of an issue, it is likely there will not be the traditional influx of imports in Q4.

There could be some relief to supply inside of Europe, with the scheduled maintenances coming to an end. Arkema had a production turnaround at its Rho, Italy facility in August and Evonik is coming to the end of a stoppage at its Worms, Germany facility, according to sources.

The snug supply is mainly impacting the spot market, with contractual agreements being fulfilled at this time.

One buyer said although it has no issue in getting its contracted orders, it knows if it had additional demand its supplier would not be able to offer more material.

A number of distributors that buy from Asian producers have said they are unable to sell MMA at the moment as they do not have the product.

However, other distributors that do not solely buy from Asia said they have adequate supply at this time.

Spot prices have recently firmed and the lower prices in the high €1,300 FD (free delivered) NWE (northwest Europe) were no longer present in the market this week.

Prices over €1,500/tonne FD NWE were heard from some sellers in the market, however it is unclear with supply limited how much business is actually being done at this price.

The other aspect squeezing supply is the continued solid level of demand from both plastics and coatings.

Plastics demand has been strong throughout the year and is the main end-use of MMA. Buoyant automotive figures continue to boost overall levels. That said, polymethyl methacrylate (PMMA) players see good demand across the board, not just from the automotive sector.

Coating demand in 2016 has been healthy, although there was no noticeable peak in this year’s coating season, demand has been steady and durable.

At this time, market participants traditionally start to look at inventories and look to de-stock before the end of year. However, sellers said they are not seeing any signs of this at the moment, but that could be linked to supply being snug down the supply chain.

Buyers and sellers expect supply to remain short at least for the short term; with a number saying they don’t think things will change until the Christmas period when demand will soften.

Next year, the global MMA landscape could change, with major new capacity coming onstream in the Middle East.

340,000 tonnes/year is scheduled to come onstream in 2017, resulting in Saudi Arabia jumping to be the seventh largest producer of MMA in the world.

Mitsubishi Rayon Co, parent company of MMA major Lucite International, is scheduled to come on stream with its joint venture with SABIC of a 250,000 tonne/year MMA facility in 2017. 

Petro Rabigh, the joint venture between Japan's Sumitomo Chemical and state-owned energy firm Saudi Aramco, will also have a new MMA plant next year with capacity of 90,000 tonnes/year of MMA.

Petro Rabigh is delaying the completion of its Phase II expansion project, including the MMA production, to the second quarter of 2017, citing construction market challenges, the Saudi Arabia-based producer said on 30 September.

The new ventures have been a key talking point in Europe this year, with many questioning how they will impact the European supply balance.

A number of players think the fresh Middle Eastern imports will displace Asian material in Europe and so could add length to the Asian market.

There is also a view that global operating rates could drop slightly to avoid oversupply. There has been talk for some time of potential rationalisation in Europe from players in the market. But at this stage it remains talk.

Examining the current supply situation highlights that despite a lot of capacity in Asia, with the combination of certain factors the European market can become tight.

Although players do not know what will happen next year, shortness in supply is likely to stay at least to the end of this year for the European MMA market.

The EPCA meeting runs 1-4 October.

Focus article by Katherine Sale

Image source: Monkey Business Images/REX/Shutterstock

By Katherine Sale