Distribution market sheds more feathers / Supply restrictions meet with weak demand / Direct business starts to pick up / All signs point to hikes in March

The European compounding and distribution market for engineering thermoplastics was so subdued in February that, despite the on-going high cost levels and widespread production cutbacks, producers were unable to achieve more than a weak rollover for freely negotiated orders. This situation largely was the result of distributors' battles for volumes, as each vied for customers´ attention. Some buyers reportedly switched to the secondary market. In most direct business transactions, on the other hand, producers were able to score points - at least in those cases where contracts are negotiated on a monthly basis. Quarterly agreements remained unchanged in any case, and the EUR 10/t rise in February's C3 contract did not justify a rise to a higher window for PP compounds. Prices for PMMA and especially POM, on the other hand, had to concede more ground as a result of pressure from cheap Asian imports.

Despite producers and compounders' cautious approach, supplies usually sufficed to meet demand. In the case of standard POM, the wave of imports has resulted in almost a surplus. Notations were spared further decline not only by longer-term agreements, but also since direct business livened up considerably. Demand from the German automotive sector was surprisingly strong, and the lighting industry also proved lively.

These trends continued into March, and the building industry's rise from its winter slumber should provide an additional boost. At the same time, feedstock costs have either risen (propylene up EUR 50/t) or have firmed (benzene up EUR 14/t). With many quarterly agreements due to expire soon, the market is heaving with news of prospective increases. This may also have a retroactive effect on March prices for engineering thermoplastics, as some buyers will try to top up before the Q2 price round commences. All signs point to an upswing.

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