August Contracts
Europe August acrylonitrile (ACN) contract discussions will get underway next week now upstream propylene has settled down by 15/tonne.
Based on propylene cost, ACN values should fall 16.50/tonne, but customers want to see a bigger drop, citing falling spot numbers and a long market.
August is traditionally a weak month for downstream acrylonitrile-butadiene-styrene (ABS) because of summer shutdowns, particularly in southern Europe, and demand from downstream acrylic fibres has been sluggish for the past month.
However, a producer said that historically contract numbers are mainly based on feedstock costs rather than spot prices or market sentiment, so values should not fall much further than propylene numbers.
Buyers retorted that when propylene prices were going up and the ACN market was short, producers spiked numbers much more than justified by cost. From January to July this year propylene prices increased by 66/tonne, while ACN has risen by 115/tonne.
Upstream
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.
Firm tendency in the ammonia market continued this week, with further August business concluded at $490-495/tonne FOB Yuzhny and little product left to sell. Ideas are starting to turn to September, but suppliers are in little hurry to commit tonnes given expectations that prices will rise as August progresses, on the back of scheduled maintenance shutdowns impacting availability out of Yuzhny and strong demand for shipments to the US.
Downstream
A predicted hike of about 100/tonne for monthly styrene barge contracts has led European acrylonitrile-butadiene-styrene (ABS) producers to target August contract increases. ABS manufacturers will wait until styrene has settled before offering firm numbers for August, but are confident of implementing an increase given cost movements during July. A couple of buyers admitted prices are likely to rise slightly but not as much as producers would hope to cover the cost increase, as demand is currently weak because of the traditional August shutdown.
No spot deals were reported this week in a very quiet market.
The August shutdown period is restricting buying interest from downstream ABS customers and acrylic fibres producers say they have enough inventory to see them through August.
A couple of traders say they cannot sell anything in the market for more than $2,250/tonne CIF WE, although a producer questioned whether the market was indeed falling so fast given deals had been done last week at $2,400/tonne and $2,300/tonne CIF WE.
A Turkish producer is said to be offering 2,000 tonnes of cargo, which players took as a sign the market is long given this particular manufacturer rarely enters the spot market. One trader said it was offered at $2,500/tonne, which is far too high for the market, while another said the lot was taken at $2,150/tonne. However, no confirmation was heard either way.
The majority of players notionally put the range around the $2,300/tonne level, so the higher end of the range has been brought down by $50/tonne, to $2,250-2,350/tonne CIF WE.
($1 = 0.70)
This week on ICIS ( www.icis.com):
28/07/2011 17:14 Third producer, consumer follow 15/t Europe August propylene fall
27/07/2011 14:48 Initial Europe August propylene settlement fails to find support
26/07/2011 22:24 Corrected: Initial Europe August propylene contract rolls over
26/07/2011 12:53 INEOS second-quarter EBITDA grows 8.5% to 538m
25/07/2011 22:53 US Ascend ACN plant shuts down because of power outage
