Market and product

Firming prices for methyl methacrylate (MMA) in Asia are impacting contract discussions in the European MMA and downstream polymethyl methacrylate (PMMA) markets, sources said on Monday.

The price increases for Asian MMA has become a key talking point in the European market, with the possibility of the increasing prices in Asia resulting in a decrease of Asian material coming to Europe.

For MMA the European market there has already been a slight decrease in Asian material arriving, however for downstream PMMA, the market is yet to see any change.

Spot price hikes in Asia are being driven by substantial gains in Chinese domestic prices on the back of constrained spot cargo availability, combined with a pick-up in physical trading activity.

As of 15 April, spot MMA prices for 20-300 tonnes cargoes averaged at $1,375/tonne CFR (cost and freight) southeast Asia following business done for April delivery. This marked a 6% increase compared to the same period a month ago while taking spot prices to a 14-week high, ICIS data showed.

As of 22 April, discussions for MMA parcels of 20-300 tonnes for May delivery were hovering at around $1,400/tonne CFR (cost and freight) southeast Asia, showing week-on-week increases.

Constrained spot MMA supply on the back of plant maintenance in China helped to boost sentiment in other regions including southeast Asia, market sources said.

Increased spot MMA enquiries in a market scenario that is generally falling short of cargo availability helped to lift the mood, with several players at sold-out positions for April material.

Outlook in the short term bore an optimistic mood, amid planned plant turnarounds in the April-May period expected to lend support to the Asia market, according to regional sources.

Meanwhile, the improved market sentiment as a whole is also helping to prop up Chinese domestic prices of downstream PMMA, amid buyers returning to replenish low inventories.

Several PMMA manufacturers were understood to have limited spot inventories, coinciding with buying momentum that is envisaged to gather pace in anticipation of a possible uptick in spot prices.

European players in the MMA market said they have seen a reduction of imports, with the market no longer as awash with material as it was a year ago.

Last week European MMA spot prices firmed slightly, with rising prices in Asia contributing to the increase, with spot volumes offered from Asia at a higher price level than has been seen in recent weeks.

One buyer said traders were reluctant to confirm Asian cargos, for delivery in six weeks, at lower levels, adding that the prices offered were quickly firming from that region.

Rising prices in Asia are entering April and second-quarter European MMA contract negotiations, which are taking place now. Settlements for April are being agreed, while Q2 talks are slower to conclude.

MMA producers are separately seeking increases of around €50/tonne over previous levels, because of a rising cost base, reduced length in the market, steady demand, higher prices in Asia, and in an effort to improve margins.

The cost of key feedstock acetone in Europe rose in April by €51/tonne, following the €60/tonne increase in the upstream April propylene contract price.

This represented 85% of the propylene contract price increase. It was also the first contract price increase for the raw material since June 2015, and along with changing supply and demand dynamics in the MMA sector, firmed sentiment in the market.

Last week, acetone spot prices hit their highest levels of 2016, on supply constraints.

MMA buyers are resisting the targeted levels, and in a few cases are seeking stable pricing, as there is sufficient material to cover demand, and as there is residual caution in the market, with some buyers concerned that these increases will not be able to be passed down the chain.

Nevertheless, some double-digit increases have been agreed for April contracts, and further upward pressure on pricing is expected in May.

Demand is set to be stable to firm in the coming months, as offtake from the derivative coatings and construction sectors is usually at its strongest in the spring and summer months. Performance in the plastics sector remains at a good, and better-than-expected level.

Europe MMA Q2 price talks are likely to continue for some weeks, with an increase over Q1 levels widely expected, although the magnitude of any potential hikes remains to be seen.

The impact of Asian imports has been much more significant in the downstream PMMA market, with Asian competition for standard grade material pushing prices down.

At this stage stable-to-soft settlements have been agreed for Q2, with talks on the brink of conclusion.

Although Asian imports are currently pressuring prices down, given the rising prices in Asia, there is potential for import volumes to decrease if the trend continues.

The main import volumes for PMMA in Europe are thought to be originating from South Korea.

One producer said the reason Europe is seeing so much material from that region is because South Korean producer LG MMA Corporation now requires less PMMA to produce flat screen televisions, given the advances in technology.

This then resulted in excess material for the producer, which is subsequently looking to Europe to relieve inventories.

Although imports increased considerably in February, compared with the levels in the same month in 2015, there is potential for PMMA imports to decrease going forward.

Given the increasing upstream MMA prices in Asia, there is sentiment that less MMA will be polymerised into PMMA, leading to a reduction of stocks and then imports.

When MMA supplies are heavy it is logical to convert excess volumes into PMMA, as the polymer is easier to store than the upstream chemical.

However, with firming prices in Asian being driven by a mixture of planned and unplanned turnarounds, it is currently unclear if the recent trend is sustainable after the supply constraints ease.

It is because of this that the impact on the European MMA and PMMA markets is currently unknown. However, decreasing import levels have already helped to balance the European MMA market and has the potential to do the same for PMMA.