Changing market dynamics

During the second half of 2018 there was a change in the market dynamics for many petrochemicals, including for methacrylates. A wave of poorer company results and conservative outlooks were being circulated from the automotive and construction segments among others. National trade policies were being cited as a reason for stifling inter-regional business, resulting in softer demand globally. The economic outlook was becoming bleaker in several countries and regions around the world, and the confidence of business took a notable dip.

This lack of confidence precipitated a de-stocking activity in the methacrylates value chain in Europe, which started in the middle of 2018 and gathered pace before being completed in Q4. There was therefore an observable slowdown in demand, which served to further increase the difficulty of achieving the de-stocking, which led to a very subdued market in Q4, during December in particular.

Improved global MMA supply capability

Global availability of MMA improved progressively through 2018 due to the startup of new assets in Saudi Arabia and China, completion of some major maintenance events and smoother operation of the existing asset base. The market moved out of the state that it had been in for the previous year and a half and there was a greater confidence in the robustness of the supply side in all regions.

LI’s Cassel site has operated consistently well since its major overhaul in March/April 2018, proving to be a reliable source of products to customers in the EMEA region. In addition, imports from the MCC group “sister” plants around the world have been utilised to supplement the production at Cassel, ensuring a more robust supply chain and wider product offering. SAMAC, MCC’s JV plant in Saudi Arabia, based on LI’s Alpha technology, has continued to operate well since its start up at the beginning of 2018 and has proven to be a strong addition to the company’s global MMA and pMMA supply base.

Price adjustment

The combined effects of the developments on the demand side and the supply side resulted in MMA prices around the world being adjusted downwards over the last six months to reflect the change in the supply/demand balance. It appears that this had some positive impact in Europe in Q1 regarding confidence and has resulted in demand picking up from the lows of Q4 and returning to a more seasonal norm.

Outlook

With the uncertainty that continues to exist around the world on several fronts, it could be difficult to paint too optimistic an outlook for 2019. However, LI’s experience is that products in the methacrylate value chain prove to be quite resilient compared to others even during more difficult economic periods, such is the diversity of the product application and the creativity of the customer base (for example, see the Acrylic Design Awards held recently in Turkey with LI’s partner Ak-tas). Hence global MMA demand is still forecast to continue its growth again in 2019, primarily in Asia, and at a rate of just over 2% for MMA compared to 2018.

Can you describe the market in Asia recently in terms of demand?

Demand in Asia increased by 4-5% in 2018. One contributory factor has been the boom in construction in Japan for the 2020 Olympic Games, giving a lift of 3%. Demand for pMMA and also MS for Light Guide Panels in flat screen applications continue to be strong and t-ABS for white goods and MS for cosmetics bottles and containers have also contributed to the strong demand position.

The US trade policy with China resulted in some weaker demand initially, but Chinese manufacturers have largely been able to find other outlets. In addition, the restriction on the recycling of scrap pMMA in China has resulted in an uplift in MMA demand of some 40kte and hence the net effect is that China’s MMA is estimated to have grown by around 10% in 2018.

Can you describe the impact of recent developments in the supply side?

Around 100kte of new capacity came on line in China in 2018 which, combined with imports from the Middle East, has helped to stabilise the availability of MMA, and in particular in China, we are seeing that this is having the impact of stimulating demand for further growth.

There is some further capacity coming on line in China, South Korea and Singapore in 2019 which will further stabilise the supply side and result in a re-balancing of production and trade flows.

What are MCC’s plans to support customers in the Asian region in 2019?

MCC is not bringing any new MMA capacity on line in 2019 but will start a new MAA unit at its JV LMC in South Korea. The focus will be on managing the asset base efficiently and co-ordinating the production and supply of product around the world to meet customer needs in Asia and the other regions.

The adjustment of price that has taken place over the last six months and the outlook of a more stable market will allow innovators in the Asian market to look at new ways of using MMA/pMMA and we will always be supporting them. MCC/LI is also taking an active role in stimulating new demand, for example increasing the use of cast acrylic sheet for acoustic barriers in China.

Can you describe the key factors driving demand in the North American market recently?

Demand for MMA in North America has been strong over the last 12 months, driven by the generally stronger economy which saw GDP growth of 3% in 2018. MMA demand growth is usually in excess of GDP growth and this was certainly true last year across all sectors, and in particular for its use in pure acrylic coatings for interior applications.

As with the other regions there are some concerns based on the level of business confidence, but the outlook for 2019 is for a similar level of growth as was experienced last year.

Can you describe recent developments on the supply side for LI?

LI conducted a successful turnaround at its Beaumont, TX site in Q4 2018 and over the course of the year has achieved an uplift of 20% in the MAA capability. The MMA facility at Memphis, TN will undergo a planned turnaround in Q4 2019 which will see a number of projects installed, aimed primarily at reliability improvement. MCC’s global asset base will be used to source supplemental MMA from other regions, thus increasing the security of supply from LI.

What are LI’s plans to support customers in the North American market in 2019?

LI is taking further steps to increase the reliability of its supply to customers by expanding its storage footprint for all products and working closely with its third-party logistics partner to provide an enhanced level of service for customers in the North American market.