Europe acrylate ester, AA players concerned about margins amid propylene hike

LONDON (ICIS)–There are concerns over margins from players in the European acrylate ester and acrylic acid (AA) markets following the steep increase in June propylene, sources said on Thursday.

Players were in limbo awaiting the upstream settlement, that finally came on 30 May, with an increase of €80/tonne to €1,032/tonne.

The propylene contract reference price has not been in four-digit territory since July 2015, at €1,010/tonne, although it settled at its highest since October 2014.

An increase was expected, following the higher naphtha and crude prices this month, and the tightness in supply.

A number of acrylate ester and AA traders were refraining from quoting prices this week, waiting to see the extent of the propylene hike.

June contract talks will now start, with the jump in upstream prices setting the tone of the discussions.

Given the extent of the propylene hike, there are some concerns from both buyers and sellers on how the value chain will pass on the increase.

The same worries have been expressed in other propylene derivative markets, for example polypropylene (PP).

“Customers either have to absorb that increase, or pass it downstream,” said one acrylate seller.

One buyer highlighted that anything higher than a €50/tonne increase in propylene would make June negotiations very difficult.

However, supply and demand will also be a factor, with June traditionally a strong month for coatings consumption.

Demand so far has been mixed, with some coating players describing very average levels for this time of year.

This had been mirrored in the related methyl methacrylate (MMA) market, with coatings demand lower than expected, linked to poor weather and over-inflated growth targets.

There have been some logistical issues in the market, linked to the ongoing strikes in France.

Some deliveries have been moved from rail to truck, and there have then been difficulties in obtaining vehicles for delivery.

Buyers have mainly cited issues because of logistics, as opposed to a tightness of supply in the market.

However, planned turnarounds continue, and there is talk of production hiccups for one European producer.

Players will continue to monitor the outages closely, with US major Dow Chemical expected to restart its Boehlen, Germany, plant by the end of May.

Given the sharp increase in propylene, mixed supply and demand fundamentals, and concerns over margins, June contract talks are set to be a lengthy process.

Acrylic acid is used as a raw material to make superabsorbent polymers (SAP) for the manufacture of disposable diapers, surgical pads and other personal care items.

Acrylate esters are used to make paints, coatings, textiles, adhesives, polishes and plastics. They include methyl acrylate (methyl-A), ethyl acrylate (ethyl-A), butyl acrylate (butyl-A) and 2-ethylhexyl acrylate (2-EHA).

Methyl-A prices are at €1,550-1,580/tonne. Ethyl-A prices are at €1,720-1,735/tonne.

Butyl-A prices are at €1,865-1,930/tonne, while 2-EHA prices are at €1,970-2,010/tonne.

Prices are assessed on a free delivered (FD) northwest Europe (NWE) basis.

 

Pictured: Workers apply the finish coatings to an aircraft. Coatings is one of acrylic esters’ end markets
Source: Sipa USA/REX/Shutterstock

Focus article by Katherine Sale