POLYMER PRICES
Polyurethane feedstocks in January 2011: Higher costs have limited effect on polyols / MDI in weak rollover / TDI slips again / Plants in winter mode / Sluggish demand / Producers likely to seek hikes soon
The unexpectedly large rise in the cost of petrochemical feedstocks had relatively little effect on notations for western European polyurethane materials in January. Thrown off guard by the leap of more than 15% in the cost of benzene, producers struggled to find a strategy but as the full effect on the cost mix became apparent, they announced rises of up to EUR 150/t. However, the only upward movement this generated was an extra EUR 65/t or so for flexible polyols. With the building industry in off-season, MDI barely held onto a weak rollover, while TDI continued downward by EUR 40/t.
The two short working months of December and January again reduced demand, although the effect was not as noticeable as in previous years. Existing stocks and output from western European plants – most of them operating in winter mode – were sufficient to meet demand. Automotive orders for TDI and flexible polyols improved week by week, but insulation materials producers, as expected, showed little interest in polymeric MDI or rigid polyols.
Following the unexpected feedstock surge in January, price hikes are likely in the second month of Q1. Worldwide, petrochemical spot markets were still very restless over the past month and some materials saw gains of up to 10% in some regions. The triple-digit rises in the propylene (C3) and styrene (SM) contracts at the beginning of the year are not likely to be translated in full downstream, but nevertheless are bound to have a fairly significant effect on the cost mix for PU starting materials. In other world regions, producers have already taken the offensive and announced price rises of up to 15% for February. Although insiders expect supply to be more or less adequate, the ongoing positive economic situation and the gradual pick-up in seasonal business could well drive notations for polyurethane materials up.
The two short working months of December and January again reduced demand, although the effect was not as noticeable as in previous years. Existing stocks and output from western European plants – most of them operating in winter mode – were sufficient to meet demand. Automotive orders for TDI and flexible polyols improved week by week, but insulation materials producers, as expected, showed little interest in polymeric MDI or rigid polyols.
Following the unexpected feedstock surge in January, price hikes are likely in the second month of Q1. Worldwide, petrochemical spot markets were still very restless over the past month and some materials saw gains of up to 10% in some regions. The triple-digit rises in the propylene (C3) and styrene (SM) contracts at the beginning of the year are not likely to be translated in full downstream, but nevertheless are bound to have a fairly significant effect on the cost mix for PU starting materials. In other world regions, producers have already taken the offensive and announced price rises of up to 15% for February. Although insiders expect supply to be more or less adequate, the ongoing positive economic situation and the gradual pick-up in seasonal business could well drive notations for polyurethane materials up.
Outages and maintenance turnarounds
The maintenance turnaround at the Bayer MaterialScience MDI plant in Tarragona / Spain is about to end. Reports say production will be up and running again before the end of January.
China’s Yantai Wanhua Polyurethane started up a new 300,000 t/y MDI line in Ningbo, near Shanghai, on 22 December 2010. The company now has MDI capacity of around 800,000 t/y in the People’s Republic – see Plasteurope.com of 06.01.2011.
The joint venture Kumho Mitsui Chemicals (Seoul / South Korea) will carry out annual maintenance on two MDI lines simultaneously at its Yeosu site in South Korea in May.
On 31 December 2010, Perstorp declared force majeure for all TDI supplies from Le Pont de Claix / France. After a technical problem was remedied, the plant came back on stream in mid-January. However, the company says the FM will remain in place for now.
China’s Yantai Wanhua Polyurethane started up a new 300,000 t/y MDI line in Ningbo, near Shanghai, on 22 December 2010. The company now has MDI capacity of around 800,000 t/y in the People’s Republic – see Plasteurope.com of 06.01.2011.
The joint venture Kumho Mitsui Chemicals (Seoul / South Korea) will carry out annual maintenance on two MDI lines simultaneously at its Yeosu site in South Korea in May.
On 31 December 2010, Perstorp declared force majeure for all TDI supplies from Le Pont de Claix / France. After a technical problem was remedied, the plant came back on stream in mid-January. However, the company says the FM will remain in place for now.
MDI
Change January against December: Unchanged to down EUR 10/t
Producers of polymeric MDI were shocked by the leap of EUR 149/t in the January benzene contract. But for most, January is very much a low-season month, and none rushed to adjust prices quickly. In fact, some large accounts exploited their suppliers' surprise, managing not only to sweep the cost argument from the table, but also to extract considerable concessions from two major producers in return for significant order volumes. Consequently, the larger converters were able to push notations a further 3% below their December level, and as a result, the gap between medium-sized and large accounts increased from 5% to more than 8%. Due to volume pressure, producers sacrificed EUR 30/t at the bottom of the scale. Notations for pure MDI had continuously inched toward EUR 2,000/t since June 2010, but paused at that "magic threshold" in January 2011. In Asia, too, prices remained high. As in December, polymeric MDI prices averaged about USD 2,000/t, with pure grades closer to USD 2,500/t.
Supply: Good (polymeric) to balanced (pure). With the sudden onslaught of winter in December, demand for insulation grade polymeric MDI came to a screeching halt. Almost simultaneously, one large production plant that had been at a virtual standstill during the high season returned to normal operation. Demand was simply too low to swallow this enormous extra output of more than a quarter of European capacity, and inventories thus inevitably swelled. The bank holidays in Europe and the approaching Chinese New Year celebrations led global demand for the pure grade to decline slightly, minimally improving the supply situation in western Europe.
Demand: Weak (polymeric) to normal (pure). Due to the extended period of frost and the shorter working period in the two holiday-studded months, orders for the polymeric grade used in insulation applications remained stuck in January at the low December level. Order intake for pure MDI also normalised. In the footwear industry and in adhesive and coating applications, the market was somewhat quieter.
Outlook for February: One foamer was concerned about market developments in January, arguing that MDI producers have not come forward strongly enough. “We have prepared our customers for rising prices, but there is now a risk that they will misinterpret the nominal weak rollover.” Others were even blunter, noting that the risk is high that producers will want to pass through their costs, even if converters have failed to implement a hike downmarket. Although no polymer price increases had been announced for February as this report was written, insiders say it is only a question of time. They point out that spot benzene rose by a further 8% or so in Europe against the previous week, and in Asia by around 10%. In North America, two suppliers have announced price increases for all polyurethane chemicals effective 1 and 15 February. One intends to introduce the rises individually for each customer, while the other is seeking an across-the-board increase of 15% and will also extend the campaign to include the countries of South America.
Despite the fact that MDI is now tending very long, it also seems unlikely that European producers will remain passive much longer. Because demand downstream normally begins to pick up in March as the building season emerges from hibernation, demand for polymeric MDI should increase noticeably in February. As the vast majority of production plants throughout Europe are now operating normally again and ample buffer stocks are also available, this should not lead to supply problems. Nevertheless, to push through any increases, producers will need to join forces. After recent disagreements, an early influx of orders would make things easier. Consequently, the risk of hikes in this pre-season month should not be underestimated. There has also been talk that the jump in the cost of benzene will be factored in relatively quickly for pure MDI – independently of the volatile bulk business.
Producers of polymeric MDI were shocked by the leap of EUR 149/t in the January benzene contract. But for most, January is very much a low-season month, and none rushed to adjust prices quickly. In fact, some large accounts exploited their suppliers' surprise, managing not only to sweep the cost argument from the table, but also to extract considerable concessions from two major producers in return for significant order volumes. Consequently, the larger converters were able to push notations a further 3% below their December level, and as a result, the gap between medium-sized and large accounts increased from 5% to more than 8%. Due to volume pressure, producers sacrificed EUR 30/t at the bottom of the scale. Notations for pure MDI had continuously inched toward EUR 2,000/t since June 2010, but paused at that "magic threshold" in January 2011. In Asia, too, prices remained high. As in December, polymeric MDI prices averaged about USD 2,000/t, with pure grades closer to USD 2,500/t.
Supply: Good (polymeric) to balanced (pure). With the sudden onslaught of winter in December, demand for insulation grade polymeric MDI came to a screeching halt. Almost simultaneously, one large production plant that had been at a virtual standstill during the high season returned to normal operation. Demand was simply too low to swallow this enormous extra output of more than a quarter of European capacity, and inventories thus inevitably swelled. The bank holidays in Europe and the approaching Chinese New Year celebrations led global demand for the pure grade to decline slightly, minimally improving the supply situation in western Europe.
Demand: Weak (polymeric) to normal (pure). Due to the extended period of frost and the shorter working period in the two holiday-studded months, orders for the polymeric grade used in insulation applications remained stuck in January at the low December level. Order intake for pure MDI also normalised. In the footwear industry and in adhesive and coating applications, the market was somewhat quieter.
Outlook for February: One foamer was concerned about market developments in January, arguing that MDI producers have not come forward strongly enough. “We have prepared our customers for rising prices, but there is now a risk that they will misinterpret the nominal weak rollover.” Others were even blunter, noting that the risk is high that producers will want to pass through their costs, even if converters have failed to implement a hike downmarket. Although no polymer price increases had been announced for February as this report was written, insiders say it is only a question of time. They point out that spot benzene rose by a further 8% or so in Europe against the previous week, and in Asia by around 10%. In North America, two suppliers have announced price increases for all polyurethane chemicals effective 1 and 15 February. One intends to introduce the rises individually for each customer, while the other is seeking an across-the-board increase of 15% and will also extend the campaign to include the countries of South America.
Despite the fact that MDI is now tending very long, it also seems unlikely that European producers will remain passive much longer. Because demand downstream normally begins to pick up in March as the building season emerges from hibernation, demand for polymeric MDI should increase noticeably in February. As the vast majority of production plants throughout Europe are now operating normally again and ample buffer stocks are also available, this should not lead to supply problems. Nevertheless, to push through any increases, producers will need to join forces. After recent disagreements, an early influx of orders would make things easier. Consequently, the risk of hikes in this pre-season month should not be underestimated. There has also been talk that the jump in the cost of benzene will be factored in relatively quickly for pure MDI – independently of the volatile bulk business.
TDI
Change January against December: Down EUR 30/t
Apart from having to swallow an enormous increase of around 30% in the cost of toluene in Q4/2010, producers also had to put up with a drop of around 6% in TDI notations over the same period. Against this backdrop, the obvious solution would have been to seize the initiative to hoist prices again. The further increase of around 3% in the January toluene contract would have provided sufficient fuel, but the sizeable stock levels obviously weighed too heavily. This pressure to cut inventories finally led producers to make concessions averaging EUR 40/t.
Players in the Middle East and Africa were a little bolder, although their targeted increases of USD 50-100/t were more symbolic than anything else. In most cases, the material traded at around USD 2,700/t, virtually the same price as in December. In Asia, the approaching Chinese New Year led to a slight price decline of around USD 50/t in December, but after a rise of similar magnitude, notations in January more or less bounced back to their November level of around USD 2,400/t. In Central and South America, volumes changed hands at the same high prices of around USD 2,700/t.
Supply: Good. For producers, business has been increasing only gradually, and considerable stocks have built up over the past few weeks. Although around one-fifth of European TDI capacity was lost in the outage of Perstorp's French plant, other suppliers had no difficulty making up the shortage from their own output and the plentiful buffer stocks.
Demand: Normal. In contrast to previous years, orders from the automotive segment did not decline much between Christmas and New Year’s. Many car manufacturers stopped the assembly lines only on the major bank holidays – if at all. Consequently, foamers had to supply customers with upholstered seats almost without interruption. While medium-sized producers of bedding and upholstered furniture reduced their polymer purchases as usual at that time of year, mattress manufacturers, especially in the higher-priced segment, reported significantly more incoming orders year-on-year since Q4/2010. For this reason, foamers began to rebuild TDI stocks relatively soon in January.
Outlook for February: In January, too, there was no sign of any calm on the toluene spot market, as European notations added a further EUR 45 over the month (up 5% over December) and Asian prices rose by 8% to around USD 90/t. This means that contract notations will be under considerable pressure again in February. Following the restart of the Perstorp plant, European TDI production should be back at full capacity again. Furthermore, after the long period of sluggish demand, there is plenty of material in stock. At the same time, however, there are indications that demand will increase to a greater extent than originally expected. To start with, the automotive industry reports very lively order intake for the entire first quarter, with many manufacturers expecting the number to rise almost every month. What’s more, the winter months are among the most sales-intensive for mattress manufacturers, and several companies expect incoming orders from western Europe to be significantly above the 26m (down 4% over 2009) units sold last year. Observers say this growth is due to the launch of new products and models. To what extent producers can leverage the higher toluene notations and take advantage of the predominantly positive market signals to not just stabilise TDI prices, but even turn them around again, remains to be seen. In view of the fact that prices have dropped around 12% since July 2010, it seems unlikely that producers will wait too long to push for higher rewards. Shortly before press time, one player called for an extra EUR 200/t. Needless to say, the risk of an increase is quite considerable.
Apart from having to swallow an enormous increase of around 30% in the cost of toluene in Q4/2010, producers also had to put up with a drop of around 6% in TDI notations over the same period. Against this backdrop, the obvious solution would have been to seize the initiative to hoist prices again. The further increase of around 3% in the January toluene contract would have provided sufficient fuel, but the sizeable stock levels obviously weighed too heavily. This pressure to cut inventories finally led producers to make concessions averaging EUR 40/t.
Players in the Middle East and Africa were a little bolder, although their targeted increases of USD 50-100/t were more symbolic than anything else. In most cases, the material traded at around USD 2,700/t, virtually the same price as in December. In Asia, the approaching Chinese New Year led to a slight price decline of around USD 50/t in December, but after a rise of similar magnitude, notations in January more or less bounced back to their November level of around USD 2,400/t. In Central and South America, volumes changed hands at the same high prices of around USD 2,700/t.
Supply: Good. For producers, business has been increasing only gradually, and considerable stocks have built up over the past few weeks. Although around one-fifth of European TDI capacity was lost in the outage of Perstorp's French plant, other suppliers had no difficulty making up the shortage from their own output and the plentiful buffer stocks.
Demand: Normal. In contrast to previous years, orders from the automotive segment did not decline much between Christmas and New Year’s. Many car manufacturers stopped the assembly lines only on the major bank holidays – if at all. Consequently, foamers had to supply customers with upholstered seats almost without interruption. While medium-sized producers of bedding and upholstered furniture reduced their polymer purchases as usual at that time of year, mattress manufacturers, especially in the higher-priced segment, reported significantly more incoming orders year-on-year since Q4/2010. For this reason, foamers began to rebuild TDI stocks relatively soon in January.
Outlook for February: In January, too, there was no sign of any calm on the toluene spot market, as European notations added a further EUR 45 over the month (up 5% over December) and Asian prices rose by 8% to around USD 90/t. This means that contract notations will be under considerable pressure again in February. Following the restart of the Perstorp plant, European TDI production should be back at full capacity again. Furthermore, after the long period of sluggish demand, there is plenty of material in stock. At the same time, however, there are indications that demand will increase to a greater extent than originally expected. To start with, the automotive industry reports very lively order intake for the entire first quarter, with many manufacturers expecting the number to rise almost every month. What’s more, the winter months are among the most sales-intensive for mattress manufacturers, and several companies expect incoming orders from western Europe to be significantly above the 26m (down 4% over 2009) units sold last year. Observers say this growth is due to the launch of new products and models. To what extent producers can leverage the higher toluene notations and take advantage of the predominantly positive market signals to not just stabilise TDI prices, but even turn them around again, remains to be seen. In view of the fact that prices have dropped around 12% since July 2010, it seems unlikely that producers will wait too long to push for higher rewards. Shortly before press time, one player called for an extra EUR 200/t. Needless to say, the risk of an increase is quite considerable.
POLYOLS
 | |
Change January against December: Up EUR 10-65/t
At the beginning of 2011, producers were seeking hikes of EUR 150/t, putting forward as their main argument the EUR 30/t increase in the cost of propylene (C3) over the course of Q4/2010, plus the surprisingly strong rise of EUR 110/t in the cost of C3 in January. On top of this, polyol producers also had to cough up an extra EUR 126/t in January due to the increase in the average styrene contract (SM). Because not all producers proceeded equally quickly, large accounts generally added around EUR 80/t, while medium-sized accounts and orders for more specialised grades added EUR 50/t. Although the cost of ethylene oxide jumped by EUR 100/t due to the significant price rise for ethylene (C2), any hopes polyols producers may have had of pushing through an increase were dashed on the shoals of poor demand.
Supply: Balanced to good. During December and January, the two months shortened by bank holidays, demand dwindled significantly. To avoid any major stock build-up, producers cut output accordingly. In most cases, they were able to comply with their customers' requirements on time.
Demand: Weak (rigid) to normal (flexible). Compared with the premium segment, business with roof liners and car seats made from flexible polyols for mid-size cars was – with few exceptions – very slow. Orders for flexible polyols used in the production of medium- and lower-priced mattresses continued uneven, as in recent weeks. As expected, interest in rigid polyols remained slack due to the off-season in the building industry.
Outlook for February: Market players everywhere were taken very much by surprise when both the propylene contract (C3) and the styrene contract (SM) for January saw triple-digit increases. Because producers succeeded in recouping neither the margin lost in the final quarter of 2010 nor this latest leap in costs to any significant extent, margins are now in a sorry state. And costs are still rising. Dollar-denominated spot market notations for propylene (C3) jumped by around 8% in Europe during the course of January (4% in Asia), and SM gained about 5% (6% in Asia). Although the propylene and styrene contracts are unlikely to see triple-digit hikes, the polyol cost mix will nevertheless be under pressure.
Two suppliers in more proactive regions of the world have already announced price rises for all PU chemicals with effect from 1 and 15 February, at least in North America. One producer intends to raise prices for individual customers, another will seek across-the-board hikes of 15% and include South America. Although demand in the second month of Q1 will not immediately leap forward, production lines at automotive plants are returning to normal again after the Christmas and New Year breaks. To cope with the peaks in the approaching building season, manufacturers of insulation panels made of rigid polyols will soon begin building stocks of finished product, leading order activity to pick up quite considerably. Chances are that European polyol producers will also soon come forward with announcements of increases to be taken seriously.
| Prices Isocyanates / Polyols (EUR/t) | ||||||
| Material | January 2011 | December 2010 | ||||
| MDI polymeric | 1,730 | - | 1,900 | 1,750 | - | 1,900 |
| MDI pure | 1,900 | - | 2,020 | 1,900 | - | 2,020 |
| TDI | 1,950 | - | 2,050 | 1,980 | - | 2,100 |
| Polyols flexible | 1,700 | - | 1,750 | 1,620 | - | 1,700 |
| Polyols rigid | 1,750 | - | 1,850 | 1,750 | - | 1,830 |
| Data without guarantee. Compiled: 21 January 2011 | ||||||
More on PIEWeb.com: Polyurethanes: Data & Charts
26.01.2011 Plasteurope.com 828 [218089-0]
Published on 26.01.2011
German version of this article...