Low demand, high feedstock cost squeeze MMA production margins in Asia

14-Nov-11

Low demand and high cost of feedstock MTBE has squeezed margins of methyl methacrylate (MMA) producers in Asia, leading to reduced revenues, as per Platts. MMA has slumped by 20% to US$2,000/mt CFR Southeast Asia since Q1-2011. MMA prices were dragged lower by a slump in demand for downstream polymethyl methacrylate (acrylic glass), which is used for products such as LCD screens and transparent ABS. Upstream, tight supply and strong gasoline blending demand boosted MTBE prices towards the end of Q3-2011. Q1 average of Platts daily MTBE assessments was US$1017.08/mt and Q3 average was $1,130.92/mt, showing an increase of 11%. Demand has failed to recover despite Christmas amid an economic gloom. China, the biggest MMA market, has tightened credit policy leading to softer buying and selling of consumer goods in the country. A source said the high exposure of MMA producers to energy market fluctuations, via MTBE, makes the unit cost for MMA producers highly volatile. This was unfortunate considering that MTBE demand for MMA used in the petrochemicals sector is only a small portion of overall MTBE demand. MMA constitutes less than 10% of the entire demand for MTBE while producers said they require 1.5-1.6 mt of MTBE to produce 1 mt of MMA.