European Chemical Buyers Are Buying Off The Shelf As Demand Falls

The European chemicals market is adjusting buying habits to avoid a crash, with indicators pointing to a prolonged downturn through the end of 2022.

The pressure on high-cost materials has led to a fundamental shift in which buyers are abandoning contract orders in favor of spot materials.

Supply chain problems have been exacerbated by unresolved supply chain issues that emerged after the outbreak.

Soaring prices and the looming prospect of recession in places where demand had been tight have disrupted the usual business negotiation patterns in the chemical industry.

"It is unlikely that we will even reach the contract minimum in 2022. "Suppliers will ask about emission reduction plans and our intentions to buy next year." "An acrylonitrile buyer said in response to the change.

Rising prices are posing a challenge to consumption in the melamine market as discussions continue to temporarily switch to monthly contracts rather than quarterly settlements.

One supplier said that some customers had fewer orders in August, while others had no orders at all, a view echoed by consumers.

"Because demand was low in the third quarter, we pulled out of the market and lived off inventory," said one melamine buyer.

This has also filtered through to European base oil fundamentals, with some producers saying there is an oversupply in a generally balanced market.

Purchases picked up before the summer, and now with the season quiet, high inventory and prices rising, customers are delaying pickup times.

"We are seeing a dramatic situation in the market. Nobody buys domestic oil. It's the holiday season and there are lots of products to choose from." "Said one producer.

One PA producer also said the impact could be seasonal, with European buyers depleting inventories ahead of the typical summer slowdown.

There is no guarantee, however, that the surge in cheap imports will depress price negotiations for annual contracts.

The possibility of more competitive materials from other regions has also affected confidence in European epoxy. One non-integrated producer said the market was very weak.

"We can only make adjustments in raw material contracts, where we cut production by agreement with suppliers. "Everyone in Europe knows that cheaper transport from Asia will have an impact on European production."

While market sentiment suggests that demand could fall sharply, it is reassuring that this could provide a longer-term balance to market fundamentals, giving some relief to constrained supply chains.