Poor start to MMA coatings season on inflated growth targets

LONDON (ICIS)–It has been a disappointing start to this year’s coatings season for European methyl methacrylate (MMA) players, largely because of the over-inflated growth estimates for the year.

Poor weather and some destocking from buyers have also contributed to the lower demand from coatings players.

However, high growth estimates have resulted in actual demand falling short of the expected levels for the year.

There have been supply constraints in the global MMA market since mid-2016, and this has magnified the actual level of demand in the market since then.

This artificial, higher level of demand has been seen throughout the supply chain, with consumers pursuing many avenues for product in order to secure supply.

The main use of MMA is for polymerisation into polymethyl methacrylate (PMMA), which is widely used in the automotive sector.

Here there have been extensive pressure from large original equipment manufacturers (OEMs), which have also over-ordered material to fulfil manufacturing needs.

It is because of this over-ordering –  as well as purchasers requesting material from multiple sellers – that demand levels were difficult to gauge in 2017.

Some PMMA players were expecting double-digit growth from the automotive sector in 2018, and although there is expected to be growth above inflation, it is unlikely that actual growth will reach that level.

MMA demand growth is widely estimated at 3% globally, with an additional 100,000 tonnes/year of additional consumption.

Other factors have also contributed to the disappointing start to the coatings season, including the cold weather that hit Europe in March and April.

There has also been some inventory management taking place, with buyers destocking finished goods, with anticipation that prices would start to fall.

There are also many that question if there is a true coatings season anymore, with a longer and more sustained coatings demand seen over the last five years.

Some players estimate a 15% increase in coatings demand at the start for the season, around April time depending on the weather.

However, in previous years the increase in demand was much higher, and the change is linked to shifts in buying and also innovation in the market.

The second quarter remains the peak season in the industry, as construction demand ramps up as temperatures rise.

Strength in the European economy has seen an increase in services like professional decorators, and it has also been linked to less emphasis for work taking place during the summer months.

Milder winters have also contributed to the flattening out of coating demand, with innovation in some product taking place meaning they can be used in colder temperatures.

The MMA market has been better supplied in 2018, compared to the extreme shortages at times in 2017, especially June and October.

There have been a rise in imports in Europe, with the region more attractive to overseas sellers because globally high prices.

2018 started with historically high prices globally for MMA, with prices in Europe higher than any other region.

Lucite International declared force majeure on 10 May at its Cassel, UK, facility after a failed restart at the facility, which had been offline for a two-month maintenance turnaround.

Extensive preparations were made both by the producers and also traders/buyers in the region, in order to manage the risk during the stoppage.

At this stage there has been limited impact to the market from the force majeure declaration, with the producer fulfilling orders from stock.

Supply remains tight in Europe, and will tighten further if the outage at Lucite’s Cassel facility is not resolved soon.

The slow start to the coatings season provided some respite in April, but as the weather improves in Europe, demand is expected to increase.

Just possibly not to the levels forecast at the start of the year…

Pictured: A painter takes a break. End demand for MMA from the paints and coatings sectors has been less than expected year to date
Source: Creativ Studio Heinemann/imageBROKER/REX/Shutterstock

Focus article by Katherine Sale