OUTLOOK 19’: Europe PMMA market facing downward pressure amid increased imports

Katherine Sale

24-Dec-2018

LONDON (ICIS)–The European polymethyl methacrylate (PMMA) market faces continued downward pressure in 2019 and fierce competition from lower priced imports.

PMMA supply remained constrained for the majority of 2018, with the much awaited rebalancing in supply taking place later than anticipated.

Supply started to tighten in 2016, with a series of outages in the upstream methyl methacrylate (MMA) market severely impacting feedstock supply for PMMA.

While 2018 has been less turbulent, there were still a number of upstream production issues globally, with the prolonged outage for Lucite International at Cassel in May, and Evonik also running its two German plants at a reduced rate since October.

A series for delays and stoppages in the US in the middle of the year also shifted trade flows in the upstream market, as producers moved material there to support other facilities.

However, MMA supply rebalanced in the fourth quarter and this finally trickled down to the PMMA market, after the outages in recent years dictating much of the dynamics.

As supply globally improved, the impact from the new facilities in the Middle East started to emerge, as producers shifted focus to increasing market share.

It was too early in the fourth-quarter contract negotiations to see the full impact of this, but increased competition contributed to significant decreases being agreed for first-quarter contracts.

Lower MMA prices are also contributing to the downward pressure, but it is the ferocious competition between overseas and local sellers that is driving down prices.

Plummeting polycarbonate (PC) prices are also having an impact, with some consumers able to switch.

With continued supply stability expected upstream, this intense competition will remain in 2019, with questions over how low overseas producers will push prices in pursuit of market share.

The sustainability of pricing has been a key topic in the market in recent years, after MMA prices reached historic highs in 2017.

There were widespread concerns in the PMMA market over the compression of margins, with players in the extrusion sector in particular feeling the pinch.

While PMMA prices were expected to decrease once supply had rebalanced, the acceleration in the drops has been a surprise for sellers.

There is also continued competition in the sheets sector, with sheet manufactures contending with compressed margins after the prices increases last year for resins, and also competing against integrated producers.

Demand growth is also an area of doubt across many chemical market for 2019, with uncertainties and concerns over the economy impacting estimates.

“Europe has been the weakest demand area for the fourth quarter because of insecurity with Brexit and the automotive slowdown,” said one seller.

The slowdown from the automotive market, a key end user for PMMA, is also an area of concern for 2019.

However, while automotive growth did not hit the heights expected by some in 2018, growth between 3-5% was seen.

There remain opportunities for the market in the automotive sector, with PMMA also making gains over other plastics for use inside vehicles.

The sale of Evonik’s methacrylate business is expected to be completed early next year, with the process in short-listing a buyer expected have been completed in the first quarter.

For now, downward pressure will continue for the first part of the year, with investments upstream expected to improve reliability going forwards.

Focus article by Katherine Sale

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