Our local representatives in the methacrylates field together with our world-class business systems and global presence mean we’re in the best possible position to help our customers and industry partners understand the marketplace and its dynamics.

Here, Malcolm Kidd, EMEA Monomers Business Director, shares his latest views and insight (as of October 2019).

Weaker demand environment

A number of relevant statistics have been published since the end of the second quarter which give an insight into the general state of things;

– GDP growth rate for the EU28 fell to 1.4% year on year in Q2 which was down from 1.6% in Q1 and was the lowest it has been since Q3 2013; after more than a year of downbeat news.

– The European automotive industry was reported to have shown a reduction of 3% in the first half of 2019, and, as much of a concern, the Chinese automotive market (the world’s largest) continues to be under strain due to the stand-off in trade with the US.

– After a good start to 2019, the EU construction industry index (both housing and industrial) experienced sizeable steps down in each month through Q2 and is now expressing a concerning outlook, which has brought further pessimism.

MMA and derivatives are used extensively in these key segments and have therefore felt this impact to some extent; both in the EMEA region, but also globally. This has prompted sellers to look more widely for opportunities, into different applications and geographies.

There has been a prolonged period of destocking throughout the methacrylate value chain over the last twelve months, which has now largely been completed. Buyers have become accustomed to operating on a “just in time” supply basis, on the assumption that material will be readily available to overcome any hiccups, but with such a state of flux, this may still present some risk.

One of the benefits of methacrylates is their wide range of use, and whilst it does not make them completely immune from a generally softer economic environment, it does mean that there continues to be areas where demand is growing well, and the mood is more positive. There has been a period of price adjustment from the high point of the cycle in 2017/18 and this has brought the prices for MMA and pMMA back “into the pack” which has also helped to re-stimulate demand in some key markets and applications.

Supply side “ups and downs”

The supply side has been bolstered by the addition of new and re-started assets in

Asia through 2019, but it is increasingly difficult to ascertain the actual production output from the asset base. Away from the scattering of unplanned production outages, output is being affected by number of factors. Weakness in other chemical markets is resulting in a restriction in the availability of feedstock for MMA production at some locations.

There is a growing list of manufacturers using the reduced pressure on day-to-day production to take the opportunity to conduct maintenance activity or simply to reduce production in order to control inventory.

In addition, there is a continuing nervousness over the stability of crude oil prices due to ongoing geo-political tensions and, therefore, careful attention is being paid to feedstock costs and the impact on operating margins, which is now starting to have an impact on short-term decision making.

It is therefore important to look beyond the headlines of the development of the industry over the last 12 months to find the real picture.

Current uncertainties

A number of H1 company reports published recently attest to the current difficulties of being in the chemical industry. The level of uncertainty that exists makes it difficult to see a rapid improvement in the outlook for the second half of this year. As always, there are pockets of positivity within this, but it is clear that there is an over-riding feeling of “short termism” to business and that some will be seeking to review previous strategies and redefine what is core to their business.

Mitsubishi Chemical continues with its strategic focus on the global production of a wide range of methacrylate monomers and derivative products and is continuing to invest to improve the sustainability of its current asset base as well as seeking opportunities to deploy its MMA technologies in new assets.