August Contracts
European acrylonitrile-butadiene-styrene (ABS) producers are targeting increases on August contracts because a €100/tonne hike is predicted for the monthly styrene barge contracts.
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.
Upstream butadiene has already settled at plus €30/tonne for August, although acrylonitrile (ACN) is expected to fall slightly.
A couple of buyers admitted that prices are likely to rise slightly but not as much as producers would hope to cover the cost increase, as demand is currently weak.
While the downstream automotive industry continues to perform strongly other sectors, such as construction, are softening. This is mostly down to several customers closing or reducing production in August, particularly those based in southern Europe.
One buyer therefore calculated that overall costs will probably increase by around €50/tonne, but ABS numbers will likely only go up by around €20-30/tonne.
Another customer said it will push for a rollover in August before accepting higher numbers in September as sellers are sitting on high inventories, so anything sold will have been produced on feedstocks bought in July.
A manufacturer countered that underlying demand remains healthy, and that it only seems like the market has softened because of the recent influx of cheap imports from Asia.
Asia
European buyers and traders say they can still find material from Asia for around €1,800/tonne FD, but that numbers have probably bottomed out as feedstock costs climb in the region.
Asian ABS numbers were stable this week, although demand continues to wane in the face of economic difficulties in the US and eurozone, thus affecting confidence in these export market for end-use goods. High raw material costs are eating into producers’ margins, and several have reduced or shut production. Product in the region is valued $2,180-2,220/tonne CFR NE Asia.
There remains a big price difference between European and Asian prices, but because of the shutdowns in Asia some think availability from the region could soon dry up.
However, European buyers said that the effects of this will not be felt for some time as there is a six-to-eight week lead time from Asia, so even material ordered now will not arrive until September.
Upstream
The European styrene market was subdued this week as players waited for the August barge contracts to settle. Activity was sparse, with buyers electing to remain on the sidelines. Many feel the market has become overheated, one trader said, adding to the muted feeling during the week. Spot values were at $1,500-1,520/tonne FOB Rotterdam on Friday, up $20/tonne from the previous week’s close.
The European butadiene (BD) contract settled up by €25/tonne at €2,525/tonne FD NWE for August. Availability is improving as both European and export demand has slowed and spot numbers are slipping as a result. Latest numbers pegged domestic spot activities at about €2,600/tonne FD NWE.
Europe August ACN contract negotiations will get underway next week now upstream propylene has settled down by €15/tonne. ACN buyers are targeting hefty decreases, saying that the long market and softening spot numbers should see contract values fall far further than costs. Producers maintain that contract prices are historically based on feedstock prices, so numbers will not fall much more than propylene.
($1 = €0.70)
This week on ICIS ( www.icis.com):
28 Jul 11 17:14 Third producer, consumer follow €15/t Europe August propylene fall
26 Jul 11 12:53 INEOS second-quarter EBITDA grows 8.5% to €538m
26 Jul 11 10:02 Asia ABS demand weakens on US, eurozone debt woes
