European Methacrylate Market Review - April 2008
MMA demand continues to be robust in the first quarter of 2008 and the outlook for the
rest of 2008 is positive, if a little more cautious than at this time 12 months ago.
Lucite International (LI) has a strong commitment to delivering a reliable and high quality
supply service to its customers in the MMA merchant market. This service extends beyond delivering
products that meet customers' needs on time, and in full to ensuring that it adds value wherever
it is possible to do so. With this in mind, we are pleased to be able to share our understanding
of the MMA market dynamics so that our customers and partners can appreciate the trading conditions
we face together. With more than 25% market share and a global spread that encompasses the US,
Asia and Europe, we believe that our world-class systems and local market intelligence provide the
best possible forecasting and planning tools to underpin effective supply. Here, MMA Business
Director, Malcolm Kidd, shares his thoughts on the current market dynamics and outlook for 2008.
Another strong year for growth in MMA demand
Statistics show that 2007 was another strong year for MMA. Global demand increased by over 5% to
2.9mmtes; the highest growth came from Asia with Europe also contributing a strong performance.
The major European economies remained buoyant all year and the developing countries within the
region, particularly those in Central and Eastern Europe, maintained their rapid expansion. This
environment resulted in a total increase in MMA demand for the Europe, Africa and Middle East
(EAME) region of above 4.5% over that of 2006.
2008 outlook is still positive
The impact of the well-publicised slow-down of the US economy, and the squeeze on money lending is
not having the same pronounced effect in Europe as in the US. Some reports suggest that the impact
in the European region will be dampened compared to the US, however, the influence of the weaker
US currency is encouraging imports. Some slower indigenous demand growth is becoming apparent
in a few specific areas. MMA demand continues to be robust in the first quarter of 2008 and the
outlook for the rest of 2008 is positive, if a little more cautious than at this time 12 months ago.
New build proceeding to plan
New MMA projects continue as planned with the plant in korea coming on-line successfully in
November 2007, and the first new plant in Singapore to be commissioned within the next few months,
followed by Lucite International's 'Alpha 1' plant early in Q3. The chart above shows the incremental
operating capacity added and the global demand growth achieved in the last three years, together with
projections for this year and next. NB: Operating capacity is a downward adjustment to nameplate
capacity to allow for known operating limits and planned outages.
Interestingly, since 2005, three world-scale plants have been brought on-line and global occupacity
has not fallen below 93%. The forecast is that the new capacity that is planned will be required to
satisfy the projected level of growth in demand for MMA.
MMA demand strong across the segments
One of the most positive aspects of 2007 and the outlook for 2008 is that MMA demand is growing well
in all the major market segments. Use of MMA in LCD technology continues to be a major driving force
behind this global growth. Recent announcements from major players in this field outline a commitment
to investing many millions of dollars into new manufacturing facilities that will deliver even larger
units for the consumer, which further illustrate the confidence in this sector.
Selective sectors are particularly robust
In the last 6 months, major investment announcements in methacrylate-based coatings and resins
indicate that the strong growth that has been observed in this segment over the last few years will
continue. In the coatings sector, the current wave of consolidation activity is a trend that is
being driven by the desire to grow through the promotion of major brands and is resulting in
investment in new production capacity. The impact modifiers and processing aids markets continue
to move rapidly. New capacity was brought on-line in the EAME region in Q4 2007 and more is planned
for H2 2008. Demand for acrylic sheet for glazing, fabrication and signage had a very healthy 2007
alongside the construction industry resurgence in Europe. Demand continues to be robust in 2008.
MMA margins compressed over last 6 months
There has been no respite in the cost of producing MMA as prices for the major feedstocks have
either increased or sky-rocketed in the last six months, whilst selling prices have lagged behind.
Cost pressure is a major issue for all technology routes to MMA. Our sincere hope is that feedstock
costs will fall through the remainder of 2008, but irrespective, the MMA industry must get to the
point that it can generate margins that will reward reinvestment, and hence foster continued growth.
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European Methacrylate Market Review - September 2007
With manufacturing, R&D, sales and marketing and support operations in all three main economies,
Lucite International (LI) is uniquely placed to provide reliable and up-to-date market data to
support its customers and partners in the acrylics industry. Local knowledge and experience is
backed by world-class systems to help ensure that the information is an accurate reflection of
the climate we face in the MMA industry. As part of a regular quarterly review that is publish
both on line here at www.luciteinternational.com/freeflowmarket) and in FreeFlow magazine, we
hear from Malcolm Kidd, LI's Commercial Director for Monomers in Europe.
The outlook for Europe remains positive
Over the past 12 months demand for MMA in the Europe, Africa and Middle East (EAME)
region has increased by a healthy 5%. This positive growth trend looks set to continue
at a similar rate through 2008 and is attributable to ongoing robust performance of all
15 EU countries' economies. The rapid improvement in general standard of living within
the EU's developing nations has given an added boost to the average growth figures for
MMA.
Strong demand and investment
Sectors showing the strongest demand for MMA over the past 12 months include: polymer
sheet, speciality resins and processing aids such as those used for the production of PVC
window profiles. The construction boom in the EAME region has been particularly evident
during the last 12-18 months and has resulted in a tremendous pull-through of MMA and
other associated monomers. Even more encouraging are the recent announcements from
customers of planned new investments over the next two years that will further increase
the demand for MMA. Several other major players in the industry are known to be in the
advanced stages of evaluating investments in the same time period.
European demand keeping pace with the rest of the world
Asia is undeniably the 'hot-spot' for growth in MMA demand, but the recent performance of
the European region continues to impress with the first six months of 2007 experiencing the
highest ever demand for MMA.
In a global market of approximately 2.9 million tonnes in 2007, the EAME region will account
for almost 25%. In approximately two years time, Asia is predicted to have grown to account
for just over half of the world's demand for MMA. However, EAME and the Americas are also
predicted to have good sustained growth in that period - and without any significant increase
in MMA production capacity.
New build keeping pace with demand
Worldwide demand for MMA has grown at an annual average of 4.75% each year over the
past 25 years. Over the last 5 years, the growth has been closer to 7%. These figures
suggest that new MMA capacity of almost 140kte is required every year to meet the 4.75%
increase, or 200kte at the higher growth rate. Relatively little new capacity was added
in 2006 and the same scenario seems likely again in 2007, with at least one project
being delayed into 2008. Next year will see a number of new plants being commissioned,
including LI's own Alpha 1 plant in Singapore.
Today the MMA industry in Europe is estimated to be operating with an occupacity of
>95%, after accounting for planned and unplanned outages. With no significant new
capacity scheduled to come on line for at least the next 18 months, the industry
will continue to operate at this level, which will provide an ongoing challenge for
the supply chains.
No relief from feedstock costs
The cost of producing MMA (irrespective of technology) has stayed high through 2007
and is forecast to continue as such through 2008. The price of crude oil fluctuates,
but prices today are 15% higher than 12 months ago and have been as much as 30%
higher during this period. Despite high prices, global demand for base commodity
chemicals remains strong, resulting in this cost increase being passed down the
chemicals chain. For example, in Q3 2007, the acetone price in Europe is the highest
it has ever been. LI continues to look to increase its manufacturing efficiency and
optimise its supply chains, but 2008 looks set to provide the challenge of another
year of high cost environment for producers.
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European Methacrylate Market Review - July 2007
Following the successful launch of FreeFlow magazine and our on-line quarterly market analysis in
April this year, we are pleased to bring you our latest update. MMA Monomers Commercial Director,
Malcolm Kidd, gives his views on the continuing strong demand for MMA and how the market is shaping
up as we enter Q3.
Strongest ever European MMA demand
In Europe we have experienced a balanced market with relatively stable pricing for the last two
quarters. Since the beginning of this year Europe has experienced a period of strong demand and
good supply, despite the inevitable hiccups. We are expecting the strongest merchant demand on
record in Europe during Q2. The supply side performed very well in Q1 with only one noticeable
outage. However, in Q2 the supply side has experienced a number of planned and un-planned
outages in Europe and other regions. As a consequence, we believe that European stock levels
were very low at the end of June. These are now recovering slowly, but will not be at a
satisfactory level until the end of Q3 at the earliest.
Global Markets move into balance
The major European economies are booming and demand for MMA (and pMMA) is benefiting. Demand from
Asia is still very strong. The US market is recovering after experiencing softer conditions in Q1,
as indicated by the level of housing starts. As a consequence, the global MMA market is in balance.
Asia remains a net importer and is currently satisfied by product shipped from US and Europe.
July/August will be a challenging time globally as a number of planned outages in Asia will result
in an increased demand from the other two regions - both of which are working on low inventory levels.
Forecast over 5% growth in European demand during 2007
During the past five years growth in MMA demand in Europe has been over 5% per annum. We forecast
that this will continue through 2007 and 2008. The acrylic sheet has taken the lead and is running
close to maximum capacity. The processing aids segment is also experiencing higher growth rates,
fuelled by the active construction market, especially in Russia and FSU countries where sales of
PVC windows are experiencing double digit growth. Demand increase in the coatings segment is
following GDP levels after experiencing a period of strong growth in the early part of the decade.
Demand from the coatings sector was softer in Q1; however in Q2 we have experienced the typical
seasonal uplift, even with wet weather across Northern Europe. Indications are that the normal
holiday period for manufacturers in July and August will be shorter than in the past. As a
consequence, we expect lower stock levels to persist through Q3 and pricing levels to increase.
MAA market tightens
The demand for MAA continues to grow at a healthy rate. Relatively new applications, such as
polymer additives for the construction industry, are driving additional demand on top of that
from the more traditional sectors. Recent planned and unplanned outages, plus the delayed start-up
of a new asset in the US have resulted in a tight market. It is expected that prices will remain firm.
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European Methacrylate Market Review - April 2007
Delivering reliably to customers in the MMA merchant market is of the highest priority for Lucite
International (LI). We realise just how critical our ability to supply on time and in full is for
our partners' businesses. Achieving consistent supply requires a deep and wide appreciation of the
market dynamics and that's where LI is uniquely placed. With more than 25% market share and a
global reach that incorporates all three major geo-economic regions, we believe that our world-class
systems and local market intelligence provide the best possible forecasting and planning tools to
help us supply effectively. Here, MMA Monomers Commercial Director, Malcolm Kidd, shares his
thoughts on the dynamics for 2007 and how they may effect the European market.
MMA stocks will continue to be under pressure
Demand for MMA continues to be strong on the back of some of the best economic conditions we've
had in Europe for over six years. Areas of strongest growth are associated with the construction
industry and include; coatings, baths and processing aids used in the production of PVC profiles
for window frames. The supply base is generally performing better than last year, however during
Q1 the industry has experienced unplanned interruptions. This, coupled with continuing strong
demand, has resulted in European inventory levels falling significantly. During Q2 a couple of
European plants will shut down for planned maintenance and we will move into the higher demand
period for the coatings industry. All of this means further pressure on European stock levels.
Surging European growth
Surging fourth-quarter growth across the biggest economies saw the eurozone begin 2007 on the
back of its strongest expansion for six years. The EU statistical agency said that eurozone GDP
rose by 2.7%, its best rate since 2000, with the annual pace of expansion in the forth quarter
accelerating to 3.3%, from 2.7% in Q3 2006.
Downstream growth driving MMA demand
The construction industry is a key downstream user of MMA. The demand in this industry is
seasonal and associated with economic performance. With strong economic performance from the
eurozone economies and moving into periods of higher seasonal activity we expect MMA demand to
follow historic trends and demand to increase in Q2.
Performance of European supply base will impact stocks
The European MMA supply base performed relatively poorly for periods in 2006, with most producers
experiencing unplanned outages. With continued growth in demand the supply side is being put under
constant pressure to deliver and limit further reduction to already low inventories.
Track record of MMA growth set to continue
For the last 25 years global MMA demand has grown at an average of 4.75% per annum, however
over the last ten years we have experienced an increase in this growth to ~5%, as Asian
demand has grown at ~8% on the back of innovation and regional activity. In the last 5years,
since the difficult year in 2001, the Global CAGR has averaged over 6.5%, with Asia topping 10%.
Last year (2006) we estimate the global MMA market consumed some 2.75 million tonnes - 1m tonnes
more than 10yrs ago - of which >45% was in Asia (36% in 1996). Until recently increases in
supply have been through plant up-rates and a limited number of new builds; of which Lucite
International has been at the forefront with its first plant in China last year and will follow
quickly with a new plant using Alpha technology in Singapore in 2008. Whilst other new plants
in Asia are due to come on stream from next year and in 2009 - the total will be challenged by
the annual increase in demand. We predict a continuing tight global supply and demand scenario.
MMA growth continues to grow
One of the exciting features of the MMA market is the increasing level of global growth. The
leading region is Asia with 10% growth on the back of strong economic activity and new downstream
applications. The highest profile new development is the use of pMMA to provide part of the
lighting path for LCD screens. In 2006 we estimated that over 110kt of MMA were used in this
application and with the development of atmospheric lighting we believe this segment will
continue to grow.
Supply is challenged to keep-up with Demand
During the past 12 months two new world scale plants have started in China, including our own
plant which is operating at full capacity. Our next plant, using the new Alpha technology process,
will start up in Singapore in Q2 2008. As an industry we need this plus the other new build
capacities in order to meet the forecast strong demand.
Lucite International committed to support strong growth in European demand
Since 2000, European demand for MMA has grown annually at an average of over 5% with home and
construction industry applications being key drivers. It is the intrinsic properties of MMA
and its fit into current lifestyle that has driven this growth. Exceptional durability, UV
resistance and weatherability make MMA a key monomer in the production of coatings, while
flexibility, surface warmth, colours and effects make it an ideal material for bathroom products
and contemporary interiors. And as economies continue to prosper, we predict this growth to
continue. In Europe MMA production has traditionally exceeded demand, however the extra
capacity is declining as the market grows rapidly. Europe saw its last expansion in 2003 and
since then we believe output has levelled. During recent years we've experienced a number of
un-planned supply restrictions. At times, this has resulted in a particularly tight market.
We are very much aware of this trend, which is one of the reasons why we continue to invest
in new capacity for the merchant market so that we can support its growth in Europe and
globally.
European occupacity predicted to reach 90% in 2007
Based on our best view of supply and demand going forward we believe that European occupacity
levels will reach in excess of 90% in 2007 and could reach 97% through the next two years.
Methacrylic Acid returns to balance after serious shortages.
Difficulties in the supply of MAA during 2006 were unusual. One European manufacturer
experienced a long-term outage and others faced minor interruptions all of which resulted
in restricted supply. Since then strong demand in Asia has continued to pull product from
Europe and keep pricing firm. Demand for MAA continues to grow in the relatively new
application area of construction chemicals but the more mature automotive coatings sector
is flat. We view a balanced market for 2007, with the new MAA capacity in the USA supporting
downstream growth.
All information or advice provided in this Article is intended to be general in nature and
you should not rely on it in connection with the making of any decisions. Lucite International
Limited and the companies within the Lucite International group of companies try to ensure
that all information provided in this Article is correct at the time of inclusion but does not
guarantee the accuracy of such information. Lucite International Limited and the companies
within the Lucite International Limited group of companies are not liable for any action you
may take as a result of relying on the information or advice within the Article nor for any
loss or damage suffered by you arising therefrom.
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