CONTRACT DELTA Q3: €148/tonne (+3)
Supply and demand
The European cyclohexane (CX) market is balanced and there are no problems to report in relation to supply and demand.
Market commentary was thin this week owing to the absence of market participants due to the summer holidays.
Nonetheless, demand downstream is as expected for August, albeit somewhat slower than the same period last year.
Upstream
Despite Washington reaching a last-minute agreement on a bill to raise the US debt ceiling, concerns have heightened over the turmoil in the global economy. Crude prices have been in decline since the start of the week and fell even more sharply on Thursday as global stock markets collapsed.
On Friday afternoon, September Brent was trading around $108.25/bbl, down from the previous week’s close of $116.74/bbl. September WTI was trading around $86.10/bbl, down from $95.70/bbl.
European benzene values slumped towards the end of the week over mounting macroeconomic concerns, although market fundamentals are keeping supply/demand dynamics balanced-to-tight. The August contract was confirmed at €886/tonne FOB NWE, up €132/tonne from the previous month. Spot values for August were at $1,270-1,290/tonne on Friday afternoon, down $5-10/tonne from last week’s close.
Downstream
In the caprolactam market, contract price discussions are in the very early stages following Friday’s benzene contract settlement. However, it is reported that some caprolactam contracts were agreed ahead of the August settlement.
According to market sources, a major consumer and one of its suppliers agreed their August contract price at an increase of €90/tonne. Although not fully confirmed by all of the parties concerned, a second smaller buyer said that it too had agreed a contract with a supplier at an increase of €90/tonne. The buyer did not disclose its actual market price but hinted that it was slightly above €2,000/tonne.
Others said that suppliers are seeking a €150/tonne increase for August volumes, following the benzene settlement.
Further updates relating to the August contract prices are expected in the coming weeks. One major producer did not expect to settle any time soon, partly because of summer holiday absences but also because the ideas of producers and consumers in relation to the current supply and demand dynamics of the market are so different.
Consumers do not agree that the supply situation in Europe is as critical as producers say it is. However, according to producers, some customers are “begging” for material because of various unplanned outages and loss of production at European facilities over recent months.
UBE Chemical Europe remains in force majeure at its 95,000 tonne/year facility in Castellon, Spain. UBE was unable to give any details or ideas as to when the force majeure will be lifted.
BASF and DSM have also lost some production in recent months, adding to the supply constraints, other producers said.
Meanwhile, nylon 6 demand has slowed because of the summer holidays, but looking ahead to September and into October the outlook remains positive.
Adipic acid
Contract price discussions are in the very early stages. A number of summer holiday absences have also delayed the start of any serious negotiations for August.
An early indication from producers is that they will be seeking to increase prices by €100/tonne, while consumers are talking about a rollover.
One supplier said it expected to settle somewhere in the middle and cited an increase of €50/tonne as more realistic.
The concern for buyers is passing through an increase downstream particularly in August, when demand typically slows.
According to buyers there is no shortage of adipic acid in Europe.
Producers confirm that there is some length in the market, but believe that this is temporary, since demand is expected to recover in September, both in Europe and Asia.
Market followers also believed that end-users were currently running with very low inventories and operating on a hand-to-mouth basis, which gave the impression that demand was actually lower than it currently is.
Because of this, sellers think that demand will come back at a high level in Europe in September. This of course remains to be seen.
According to buyers, August was an easy month to predict in terms of downstream demand, but for September and beyond it was difficult to make a firm prediction about downstream markets, such as coatings, PU and engineering plastics.
Radici is currently in planned maintenance at its 80,000 tonne/year plant in Novara, Italy.
This week on ICIS ( www.icis.com ):
02/08/2011 16:51Poland's PKN Orlen wants Anwil fertilizer, PVC offers by end of year
02/08/2011 11:02 Asia August capro settles around $150 higher this week
02/08/2011 09:54 Taiwan's FCFC starts up nylon chip plant in Vietnam
