US October MMA prices likely to see big increase

10 October 2016 21:31 Source:ICIS News

However, as propylene supply constraints begin to ease in October, it is possible that proposed price increases will weaken as buyers push back. (Image source: Dow Chemical)
However, as propylene supply constraints begin to ease in October, it is possible that proposed price increases will weaken as buyers push back. (Image source: Dow Chemical)

Focus article by Tarun Raizada

HOUSTON (ICIS)--October is likely to see another increase in US methyl methacrylate (MMA) prices due to feedstock pressure.

Sources are saying that the proposed October price increases are largely in line with expectations due to a recent run-up in upstream spot propylene prices.

However, as propylene supply constraints begin to ease in October, it is possible that the proposed price increases will weaken as buyers push back.

The market believes that the sharp rise in propylene prices may curb propylene demand in the near future. The additional supply would then blunt propylene prices. As a result of this, an MMA buyer commented that it was “told to expect price relief either late in October or in November.”

Meanwhile, sources are saying they expect most of the proposed 6-9 cents/lb ($132-199/tonne) increase for MMA to stick in October. A buyer believes that the market will ultimately settle on a 5-6 cents/lb increase for the month.

Supply continues to remain on the tight side with low inventories.

Meanwhile, demand has been steady, but seasonal weakness has begun to surface, especially in the paints and coatings sector.

However, a producer said that demand is likely to remain good in other sectors, such as polymethyl methacrylate (PMMA) and adhesives, which are not as cyclical as paints and coatings. Overall, another producer said that the “lack of supply will keep things balanced into the fourth quarter”.

Dow Chemical is still running at reduced rates at its facility in Deer Park, Texas, according to sources. The producer had a production problem starting in July linked to force majeure being declared on an upstream feedstock.

Then, in a customer letter on 27 September, the company said it was implementing 100% order control for MMA in North America, effective immediately or as individual contract terms allow. The letter stated that the order control would remain in effect until further notice.

As a result, exports from Dow to Europe are expected to remain at a lower level at least until the production problem is resolved.

The ICIS assessment puts September MMA contracts at 83.50-93.50 cents/lb on an FD (free delivered) rail basis, an increase of 2.00 cents/lb. Truck material is assessed at a 2.00 cents/lb premium.

Major US producers of MMA include Arkema, Dow Chemical, Evonik and Lucite.

INSET IMAGE: MMA is used in paints, coatings and adhesives. (Mint Images/REX/Shutterstock)

By Tarun Raizada