Global methyl methacrylate (MMA) players are looking to the Middle East, in the hope of some relief to the current shortness in supply.
Supply started to tighten in the second half of 2016, with a series of planned and unplanned plant outages in Asia the catalyst. Since that point, the supply situation has gone from bad to worse globally, with prices soaring in Asia, Europe and the Americas.
Some market players estimate that more than 25% of global production has been offline at points this year, continuing the tightness with inventories throughout the supply chain severely diminished.
After a sustained period of tightness, when many buyers have simply been unable to secure enough material to, at points, keep production going, everyone is asking if there is any relief on the horizon.
Will the joint venture between Mitsubishi Rayon (MCR) and SABIC – Saudi Methacrylates Company (SAMAC) – be the release the market has been looking for?
ASIA THE CATALYST
Asian MMA prices started to firm in April 2016. This was the start of the global uptrend in pricing with significant increases seen in both the Americas and Europe.
There were a number of MMA plant outages in Asia, both planned and unplanned, starting from the second half of 2016 to Q1 2017. This series of plant troubles affected supplies significantly, at a time when demand in the region had remained fairly strong and healthy.
Regional producers’ inventories were also severely drawn down by the outages. Asia’s prolonged production problem is impacting trade flows globally.
The impact on supply was twofold – not only did exports from Asia decrease significantly, it also pulled material away from other regions. This has been the case in Europe, with at least one producer consistently sending material to Asia for captive use.
AMERICAS’ PATH TO SHORTNESS
Production in the Americas has been plagued with problems since the middle of 2016, with prices soaring in 2017.
The overall supply level in the Americas was said by some global buyers to be even worse than in Europe. Problems started with the lengthy outage for Dow Chemical at its 360,000 tonne/year MMA facility at Deer Park, Texas. The producer was forced to run its facility at reduced rates from July. It was only in January 2017 that the producer confirmed it was running at full rates again. Yet sales controls remain in place.
Again the impact on the market was twofold – first the loss in production from the facility, and then because Dow started buying major quantities of material globally. This reduced available material from Brazil and Asia, with Dow turning to producers there to fulfil its own requirements.
The production problems in the Americas have been widespread, with the majority of the facilities having some form of production outage since the second half of last year.
Feedstock issues at Unigel’s Mexican facility resulted in the producer sending volumes from its Brazilian plant, reducing product available for merchant sale. Both Dow and Unigel traditionally export to Europe, so the issues for both producers reduced material heading to Europe. There has been a minor increase in volumes from Brazil to Europe in April but overall imports remain limited.
There is also talk that Dow is preparing for a turnaround at its Deer Park, Texas, facility in May.
Lucite International also experienced issues, with its Beaumont plant down for maintenance in January to February, while force majeure was declared at its Memphis facility in January. The plant is restarting in stages and should be back to normal production at some point in April.
THE EUROPEAN SITUATION
The European MMA market was an unattractive export destination for 2016 – linked to the euro versus the dollar exchange rate and also an increase in imports from late 2015 from Asia as well as the US and Brazil that took down prices.
Prices in Asia then surged from April 2016, impacting trade flows, with producers looking to send material to Asia and not Europe. This, import material in Europe was diminished throughout 2016.
From October onwards, the European supply situation significantly worsened, with sales controls implemented by Lucite between October to December, to then be applied again in February 2017. Sales controls are still in place for both Lucite and Evonik in Europe as the Q2 peak demand season gets into full swing. Inventories throughout the chain are depleted, with a feeling of frenzy in the requests for material.
RELIEF ON THE HORIZON?
SAMAC stated again the week ended 7 April that its new Saudi Arabia project is on track to start up in June. Yet some players remain sceptical.
Once the facility is up-and-running, a large amount of the material is expected to head to Asia. Europe is another possible destination, as is Africa, which is currently mainly supplied by European producers.
There is a second plant 90,000 tonne/year MMA project planned in Saudi Arabia by Petro Rabigh, a joint venture between Sumitomo Chemical and Saudi Aramco. However, the start date remains cloudy, with sources expecting it to be delayed until at least the start of 2018. Europe, Africa and Northeast Asia will all be net short MMA through 2025, according to ICIS data. Consumption of MMA continues to rise annually, with some applications growing above GDP.
The invention of the Alpha process by Lucite poses exciting possibilities.
The technology uses ethylene, carbon monoxide and methanol and can reduce the cost of production by 40%. So the process is ideal for areas with rich ethylene supply, with plans for another Lucite project in the US after 2020.
Additional reporting Melanie Wee, Ai Teng Lim, Tarun Raizada and comments from ICIS consultant Michele Bossi