Contract Iricing
European August bisphenol-A (BPA) contract negotiations have begun and should settle in the next two weeks. Prices are expected to fall by 30-100/tonne.
However, there is some uncertainty in the market regarding the continued force majeure by INEOS Phenol. Market players said that if the force majeure prolongs until the end of August there will inevitably be further phenol supply shortages and price increases in September.
Producers have warned that they already find it hard to obtain enough phenol and it is only going to get worse in September when demand for both phenol and BPA generally picks up.
One producer said that without the problems at INEOS Phenol there would be space for a price reduction but now the situation is a lot more complicated.
In contrast, buyers said that the force majeure will have no effect on pricing as they can import material from Asia and Russia to top up supplies.
Most agreed, however, that a lot depends on how quickly INEOS Phenol can get back to full production capacity.
Buyers who have already agreed their freely negotiated contracts quoted August rates at 1,550-1,700/tonne FD NWE. One producer said it was aiming to settle above 1,700/tonne FD NWE.
Formula
Formula related contract settlements will depend on the price movements of upstream benzene and phenol. The price of these feedstocks are expected to increase by around 80-100/tonne, thus the price of formula related BPA contracts may rise at the same rate.
Spot
BPA spot prices were quoted at 1,450-1,650/tonne FD NWE. One buyer said that BPA spot values are expected to rise because of uncertainties regarding upstream phenol supplies.
Supply and Demand
The economic situation in Europe has been high on the agenda of many players. A number of sources said that the market seemed unusually quiet. They said that economic uncertainties in southern European states and the euro crisis have all negatively impacted the market.
Many players have become cautious and are not willing to buy large quantities of material as they do not want to be left with expensive material in case prices drop.
In addition, the traditional European holiday period and the seasonal plant shutdowns in southern Europe have also slowed demand.
One buyer said that if demand does not pick up in September that will be proof that the market has slowed more than usual.
Production Issues
The force majeure at INEOS Phenol is still in place and there are no indications yet when it will end.
Downstream
European polycarbonate players have given mixed feedback about the market. Some said demand remains healthy while others worry because the market is quiet.
August epoxy resins prices are expected to fall by 70-150/tonne due to slowing demand and improved product availability. There has been talk of oversupply in the market which has put downward pressure on prices. Many producers expected stronger demand and tighter market conditions, thus increasing output during the first half of the year. However, buying interest has proved poorer than anticipated and now supply is long.
Feedstock
Upstream, the phenol market is tight. Demand is expected to remain healthy throughout summer, despite the usual August slowdown which is anticipated. Phenol will likely increase following a settlement of the benzene contract.
Further upstream, an initial European August benzene contract has been agreed at 886/tonne FOB NWE ($1,266/tonne), up 132/tonne from the previous month, two consumers said on Friday.
The European propylene contract settled at 1,115/tonne FD NWE for August, down by 15/tonne from July. This was the second number to emerge after an initial rollover settlement failed to find the necessary support from the market. While feedstock is firm, the bearish supply-and-demand balance continues to weigh on spot levels, but sources say these are showing signs of stabilising around 900/tonne CIF NWE.
Covering Editor: Janos Gal
($1= 0.70)
This week on ICIS ( www.icis.com ):
27/07/2011 00:08 Corrected: US spot liquid epoxy resin prices fall by up to 4%25/07/2011 13:00 Mitsubishi to try for nod for Kashima works' extended running
23/07/2011 00:59 BPA July contract settles at 1,700-1,800/tonne FD NWE
