Supplies of methyl methacrylate (MMA) — a chemical critical to the production of plastics, paints, coatings and adhesives — continues to be constrained due to production shutdowns and operational issues at aging production facilities, according to a recent report from IHS Markit.
In the report "Global acrylates and super absorbent polymers (sap) market advisory service," IHS said global demand for MMA through 2018 is expected to reach 3.7 million metric tons and exceed 4.3 million tonnes by 2023.
According to the Aug. 28 report, much of this growth is due to increasing demand for coatings and adhesives in China and elsewhere.
Global demand growth is expected to average slightly more than 3 percent during the next five years, with more mature, and primarily western, markets growing at up to 2 percent during that period. China, IHS noted, is growing at 4.5 percent per year.
MMA is essential for the production of a diverse range of consumer products, including automotive plastics, TV and electronics screens, optical devices, dental and orthodontic products.
The primary application for MMA, accounting for approximately 50 percent of global demand, is as a feedstock for production of polymethyl methacrylate (PMMA) — a key plastic used in a number of applications, including acrylic.
But according to Denis Poussin, director of global acrylates research at IHS Markit and lead author of the IHS Markit analysis, supply of the key feedstock is becoming increasingly precarious.
“MMA has been tight globally for more than 18 months, but the situation became exceptionally difficult this spring,” Poussin said.
This was due to a series of planned and unplanned production outages in Asia during 2016 which crashed operating rates around the globe.
“Similar production challenges impacted U.S. production in 2017, and the market responded with sharp price increases for MMA, particularly in China and the U.S.,” Poussin added.
According to the IHS report, MMA prices in China have been steadily increasing during the last 18 months, reaching just under $2,900 per tonne.
In Western Europe and the U.S., producers also benefited from higher prices during the same period. European prices have increased nearly 60 percent since January 2017, to $3,058 per tonne (delivered) and nearly 20 percent in the U.S. during the same period.
In addition, Poussin expects a cluster of further planned shutdowns in September and October, both in Asia and in the U.S., causing a second dip this year in operating rates which will constrict supply.
The report predicted that available MMA capacity in the U.S. would drop to 65 percent, while Northeast Asia capacity will fall 80 percent during the period.
“This tightness will lead to price hikes as companies seek to add volume through internal transfers, swaps or the merchant market. Newly built capacity will not be sufficient to cover the supply gap caused by maintenance shut downs late this year,” the IHS Markit report said.
“Our discussions with buyers have revealed that few are aware of this rapidly approaching period of renewed market tightness, especially European buyers,” Poussin said. “Typically, European buyers expect a quiet fourth quarter of the year, due, in part, to the drop in demand in the region for household paint and home improvement products, but we believe that seasonal demand decline is likely to be less this year and other demand sectors continue to be strong.”
Another reason for the market tightness, according to IHS Markit, is the oversupply in the period 2012-2016.
“So prices declined and manufacturers, who were barely breaking even, quit investing in new MMA production facilities, particularly in the U.S. and Western Europe,” Poussin said.
According to the IHS director, market demand has caught up with supply in recent years.
“But the aging facilities and underinvestment in new facilities have constrained supply,” Poussin said. “The older facilities that exist have been plagued with a number of planned and unplanned shut downs, which caused costs to rise and supply to tighten during the past 18 months. That, in turn, makes it harder for buyers to manage supply chain costs and risks.”
The commissioning of two new facilities this year in the Middle East, he said, will have minimal impact on the market and “will not be sufficient to cover 2018 production losses due to maintenance shut-downs.”
Those plants include the Saudi Methacrylates Co. (Samac), a joint venture between Mitsubishi Chemical Corp. and Saudi Basic Industries Corp. SAMAC began operation earlier this year in Jubail Industrial City in Saudi Arabia and has a capacity of 250 kilotonnes per year. Its accompanying intermediates plant is currently producing 40,000 metric tons of PMMA per year, IHS Markit said.
The second MMA plant built in the region is Petro Rabigh's 90 kilotonnes per year unit, which also has an accompanying 50 kilotonne capacity PMMA plant and opened this spring.
MMA is a key driver for the consumption of other chemicals. Roughly one-fourth of global acetone production is used to produce MMA, so MMA is a significant contributor to downstream chemical consumption, the report said.
“However, the big issue for MMA producers and buyers is the lack of reliability of aging assets and aging technology that relies upon cyanide as a feedstock for the traditional acetone route,” said Marc Alvarado, associate director of syngas chemicals at IHS Markit.
“Cyanide is an extremely poisonous chemical that producers would like to limit, given that commercially viable, alternative paths to MMA production exist,” he added.