Tightening supply underpin European Polymethyl Methacrylate market, May expectation calls for softening

Hamburg (Germany): Since the commencement of April 2024, Polymethyl Methacrylate (PMMA) prices have remained cautiously firm, supported by high upstream costs and limited inventories across the European market. While demand has been mixed across different sectors in the regional market, looking ahead, PMMA markets may see a gradual softening in mid-Q2 2024 under pressure from weak downstream demand. Buyers anticipate further discounts during negotiations, adding to their cautious stance. Even end-user buyers expect a reduction in PMMA prices.

PMMA prices have increased by USD 50/MT in the German market. The key raw material, Methyl Methacrylate, has persistently increased in cost due to high production costs and tight supply, raising the production cost of PMMA. Consequently, most PMMA manufacturers have adjusted their offers upward, citing firm cost support. Additionally, the oil market remained high, contributing to OPEC+ extending voluntary cuts into the second quarter of the year. Geopolitical tensions escalated following a Ukrainian drone attack targeting Russia’s largest refinery at Rosneft, resulting in an estimated reduction of 400 barrels per day in refinery operations for April, further increasing the production cost of PMMA. Moreover, due to low operating rates in the domestic market, the supply of PMMA was limited to meet downstream demand. Market participants reported that several PMMA producers might further reduce their production rates. On the other hand, spot PMMA prices typically remained at or above levels for contractual sales. Consequently, most buyers sought to maximize contractual offtakes, considering the Red Sea crisis delaying vessels or leading to longer lead times.

Meanwhile, demand for PMMA from the downstream automotive industry increased, contributing to an upward shift in PMMA price realization in the domestic market. According to market sources, additional working days boosted new car sales in the domestic market during April, but demand for electric vehicles cooled further due to the phaseout of government subsidies. According to the KBA Federal Transport Authority report, a total of 243,102 new cars were registered, up nearly 20 percent from a year earlier. Furthermore, the IFO Business Climate Index rose from 87.9 in March to 89.4 in April, indicating improved sentiments in German companies. However, inquiries from the construction industry were relatively low due to high interest rates. According to market sources, the German construction Purchasing Manager Index remained in the contraction zone below the threshold, indicating a persistent downturn in construction activity. Therefore, prices of PMMA FD Hamburg were settled at USD 3238/MT during April 2024.

In the coming months, ChemAnalyst expects PMMA prices to inch lower across the European market due to further expectations of a decline in feedstock Methyl Methacrylate prices. Furthermore, demand for PMMA from the downstream automotive and construction industry might soften ahead of the summer period, which could ease PMMA prices. Additionally, the availability of PMMA is expected to improve amid an expected decline in demand.