OUTLOOK ’18: European MA market largely positive for 2018, eyes on China

29 December 2017 11:00 Source:ICIS News

LONDON (ICIS)--The European maleic anhydride (MA) market has a largely positive outlook for 2018, according to many sources.

There is some debate over the potential impact of the reduced output from plants in China due to the legislation over pollution levels.

With Europe a net importer of MA, various sources talk of reliance on imported product.

Buyers feel the market will be well balanced in 2018, particularly in comparison to the tightness seen in 2017 during the second quarter and then again in the latter months of the year.

China should be calmer in 2018 compared to some of the enforced outages seen in 2017, due to the new legislation. However, the targets in place to reduce pollution by around 15% are expected to support the market.

In theory, China suffers from overcapacity, but units are estimated to be running at around 50-60%.

In terms of demand, there are some mature market segments where consumption is expected to remain flat, without much room for growth, such as the paper industry and in some cases the unsaturated polyester resins (UPR) sector, which is also described as steady.

Most talk of flat or low single-digit growth for 2018.

However, there is a feeling that in general petrochemicals have a positive year ahead.

One key concern from manufacturers particularly for Q1 is the cost of n-butane. Feedstock prices have been high and there is little respite expected in the short term.

Producers are adamant that margins cannot return to the levels seen in 2016, but buyers still feel the recovery seen to margins through the 2017 hikes, could leave some potential for prices in the medium term, when n-butane is expected to see improved availability towards the end of Q1.

“MA prices are still way over where they were a year ago so there is room to go down, even with the higher butane prices,” one customer said.

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A few sources noted that for several years there has been limited investment in chemical industry in Europe since the economic crises in 2008, meaning that there is often insufficient merchant capacity.

“Prospect[s] in 2018 [are] not nice as a buyer, as some markets could go tight again with the environmental problems in Asia contributing to make the market short [in Europe],” said one source.

Indeed, one manufacturer added that the age of the plants and lower volumes of stock currently held compared to traditionally higher levels also left players vulnerable to shifts in the market. Stock levels tend to be lower than usual due to supply constraints and higher prices.

“[The] power of the lawyers has increased so as a consequence there are more force majeure declarations," it added.

For MA in the near term, some state that there are already some good spot enquires for January and February.

Many anticipate there will be triple digit targets announced for Q1 contract prices. So far, customers report offers are on the table between €80-120/tonne over Q4 on the back of limited supply, higher feedstock prices and anticipated good demand as Q1 progresses. There was confirmation of one buyer agreeing a €150/tonne increase for Q1, though as always much depends on the starting point.

Nevertheless, sellers were targeting hikes of between €100-200/tonne for Q1.

There are confirmed production issues from Hungary’s MOL unit which went into a one week outage for a cleaning process at the end of November, but encountered a leak during the procedure. However, by 22 December, the plant was confirmed to be running at full capacity again.

There are also many suggestions from market sources that one major European player has encountered production problems through November which saw a certain amount of material taken out of the market.

There was no direct confirmation from the source in question, but various players suggested that an unexpected problem had been encountered and there was a planned catalyst change due to take place at the site in January.

With these regional issues added to the reduced imports from Asia, November spot and monthly prices jumped up by around €100/tonne in many cases as a result of the restricted supplies. Similar moves are expected by some for Q1 contract prices, though settlements for quarterly business is unlikely to be confirmed until late January.

MA is mostly used in the manufacture of unsaturated polyesters resins (UPRs) used in the production of boat hulls, bathroom fixtures, automobiles, tanks and pipes. Other outlets include 1,4-butanediol (BDO), tetrahydrofuran (THF) and gamma-butyrolactone (GBL).

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