Corrected: OUTLOOK '18: Supply issues could undercut US MMA surge

22 December 2017 22:00 Source:ICIS News

Correction: In the ICIS story headlined "OUTLOOK '18: Supply issues could undercut US MMA surge" dated 22 December 2017, please read in the seventh paragraph ... MMA producers are among the largest acetone buyers ... instead of phenol ... and please read references to BDO in the ninth and 10th paragraphs as MMA. A corrected story follows.

HOUSTON (ICIS)--Supply problems in 2017 kept the US methyl methacrylate (MMA) market tight and propelled prices higher, but resolved issues and additional global capacity could undercut or even derail that trend in the new year.

Industry sources said the end of tight supply in the US, the shutdown of a feedstock unit in Texas and new capacity coming online in Saudi Arabia could lead to a market correction in 2018.

“We’re expecting the US MMA market to rebalance next year,” an end-user in Latin America said.

The tight US market over the past two years – with force majeures before and after Hurricane Harvey – pushed contract MMA prices to the current all-time high in 2017, creating a U-turn on the right side of the chart below.

During the past 24 months, there have only been six times when contract prices did not go up. Prices rose every month in 2017 (through November) except for a rollover in June.

Whatever happens with contract MMA prices in the new year, the cost of feedstock acetone could increase because of Shell’s decision to idle a phenol unit in Deer Park near Houston, Texas in mid-January.

So the domestic market will likely face a tightening supply of acetone, which is a phenol byproduct. MMA producers are among the largest acetone buyers.

US acetone supply has tightened over the past several years because of strong MMA demand and could tighten even further with the Shell shutdown. Tighter acetone supply could push the feedstock prices higher, giving MMA producers a reason to keep raising prices.

However, MMA buyers say the phenol market has been oversupplied for so long that closing just one plant will still leave that market oversupplied, which  is unlikely to have much affect on feedstock prices.

And the supply issue that drove domestic prices higher in 2017 is over, so there should be more MMA supply as the year begins, both in the US and globally.

Lucite’s almost year-long force majeure ended in late November, with both of the company’s plants now running.

New supply will also be starting up in the Middle East, with the expected start-up of the Saudi Methacrylate (SAMAC) facility in Saudia Arabia in the first quarter of 2018.

A joint venture between SABIC and Mitsubishi, the 250,000 tonne/year plant has been in the commissioning phase for at least six months, possibly because it is using new technology and not based on using acetone as a feedstock.

A veteran US MMA watcher calls the plant a game-changer because it will use ethylene as a feedstock. The source said the SAMAC unit could even stop making MMA and make acetone instead.

“That’s also one of the options they could have,” the source said.

Another option for SAMAC could threaten US MMA exports because the plant is expected to be a major producer for shipments to Europe. That would put it in competition with customers on the Continent who buy American material now.

Belgium accounted for 33% of all US MMA exports through November 2017 (the latest data available), so US producers could face new competition from SAMAC for their surplus material. Declining US MMA exports would mean more material available for the domestic market.

The veteran source predicted that when SAMAC begins running full-bore, “US pricing will fall off the table”.

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

By Lane Kelley