The current shortage of methyl methacrylate (MMA) is probably going to get worse before it gets any better. Demand for the chemical, which is critical to the production of plastics, paints, coatings and adhesives, continues to increase while supply is hampered by production shutdowns and operational issues at aging production facilities, according to new research from IHS Markit (London).
The primary application for MMA, which represents approximately 50% of global demand, is as a feedstock for production of polymethyl methacrylate (PMMA), a key plastic used in a host of applications, including acrylic or “safety" glass, better known to the general public by trademark names such as Plexiglas and Lucite. The second largest application is for production of paints and coatings, which consume about 40% of global MMA demand.
Global demand for MMA through 2018 is expected to reach 3.7 million metric tons (MMT), according to IHS Markit Global Acrylates and Super Absorbent Polymers (SAP) Market Advisory Service. By 2023, demand is expected to exceed 4.3 MMT, largely driven by growing demand for coatings and adhesives in China and elsewhere. Global demand growth will average slightly more than 3% during the next five years, with more mature markets growing at up to 2% during that time period. China is growing at 4.5% per year, IHS Markit said.
”MMA has been tight globally for more than 18 months, but the situation became exceptionally difficult this spring,” said Denis Poussin, Director, Global Acrylates Research at IHS Markit, and lead author of the IHS Markit analysis. “A series of planned and unplanned production outages in Asia during 2016 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.”
MMA prices in China have been steadily increasing during the last 18 months, reaching just under $2,900 per metric ton, according to the report. In Western Europe and the United States, producers also benefited from higher prices during the same period. European prices increased nearly 60% since January 2017, to $3,058 per metric ton (delivered). Prices increased nearly 20% in the United States during the same period.
Poussin expects a cluster of further planned shutdowns in September and October, both in Asia and in the United States, will result in a second dip this year in operating rates and constricted supply. Available MMA capacity in the United States will drop to 65%, while Northeast Asia capacity will fall 80% during the period, according to IHS Markit. 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 shutdowns 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.”
One of the reasons the market continues to be so tight is that between 2012 and 2016, the MMA market was oversupplied, so prices declined and manufacturers, who were barely breaking even, quit investing in new MMA production facilities, particularly in the United States and Western Europe, Poussin said.
“In recent years, market demand has caught up with supply, and we’ve seen continuous growth in demand, but the aging facilities and underinvestment in new facilities has constrained supply,” Poussin said. “The older facilities that exist have been plagued with a number of planned and unplanned shutdowns, 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.”
Poussin said two new facilities have been commissioned this year in the Middle East, but their added production has had a minimal impact on the market this year and will not be sufficient to cover 2018 production losses due to maintenance shutdowns. One of those plants, the Saudi Methacrylates Co., is a joint venture between Mitsubishi Chemical Corp. and Saudi Basic Industries Corp., known as SAMAC. It began operation earlier this year in Jubail Industrial City in Saudi Arabia. The Jubail SAMAC facility has a capacity of 250,000 metric tons 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 90,000 metric tons per year unit, located in Rabigh, Saudi Arabia. Petro-Rabigh also has an accompanying 50,000 metric tons of PMMA plant in Rabigh, which opened this spring.