SE Asia MA discussions flat; downward pressure expected

SINGAPORE (ICIS)–Discussions for maleic anhydride (MA) into southeast Asia were stable at $1,330-1,350/tonne amid weak market sentiment, as several buyers have sufficient inventories to meet their immediate production requirements.

A boat. Maleic anhydride (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. (Source: AP/REX/Shutterstock)

Demand is expected to remain weak in the near-term.

While some buyers were enquiring for cargoes this week, few of these translated into deals.

Typically, buyers replenish their inventories in October and November ahead of the winter months in the northern hemisphere as feedstock butane prices usually increase during this period.

“I really don’t think buyers will be in the market to stockpile any cargoes this year because they are either sourcing locally or still have high inventories,” said one northeast Asian supplier.

Demand has not recovered from the usual seasonal lull that spans from June to August, market sources said.

“We lowered our offers by $20/tonne this week to $1,330/tonne CFR [cost & freight] SE [southeast] Asia but I just don’t think it is a viable long-term solution since it will just encourage buyers to remain on the sidelines and see how low prices can get,” a northeast Asian producer said in Mandarin.

MA offers usually increase in tandem with gains in feedstock butane prices. However, suppliers observed that they have been seeing their margins squeezed in recent months amid subdued demand.

On 30 September, Saudi Aramco released its October contract prices for liquefied petroleum gases (LPGs), with prices of feedstock butane $20/tonne higher month on month at $655/tonne FOB (free on board) Ras Tanura. This is a 10-month high.

Butane contract prices this year have been increasing since March. Typically, butane contract prices are stable or softer in May to July as the summer months in the northern hemisphere results in less butane usage.

“Given the current butane price, discussions for MA at $1,330-1,350/tonne CFR SE Asia are reasonable,” a buyer said.

“I just can’t buy any more cargoes because my inventory level is still high and I can wait till November before I start looking,” the buyer said.

Spot MA prices peaked during in May amid strong demand from buyers in southeast Asia, as well as in Europe and India.

Prices had come off from a three-year high of $1,450/tonne CFR SE Asia hit on 11 May, as buyers in Europe and India are sourcing local material instead.

In particular, discussions for MA into India have reached a stalemate amid the recent depreciation of the Indian rupee against the US dollar.

Without demand from India, most suppliers in Asia are channeling the bulk of their spot cargoes into southeast Asia.

At the same time, some buyers in the region are meeting their immediate requirements with contractual volumes from domestic producers.

Demand for downstream unsaturated polyester resins (UPR), the main downstream of MA, is largely stable.

Focus article by Amy Tan