[Industry Focus]：The truth behind the soaring prices of the MMA-PMMA industry chain!

into the first quarter of 2024, MMA with PMMA price volatility has increased significantly, making it one of the most volatile products in the bulk chemicals market. Specifically, according to statistics, the price of MMA in China's mainstream market has increased by 2363 yuan/ton in the past 3 months, while the price of PMMA has also increased by 1891 yuan/ton. This price change not only reflects the change of market supply and demand, but also shows the close interaction between the upstream and downstream of the industrial chain.

Figure 1 MMA-PMMA price trend in the past few years (unit: yuan/ton)

1. Tight supply:

enterprise operating rate is low: from late 2023, due to the dual impact of high crude oil prices and the downturn in the consumer market, the operating rate of China's MMA enterprises is generally low. The operating rate of many enterprises is less than 50%, and even some enterprises are in a state of parking for a long time. This low operating rate directly leads to the reduction of MMA resources in the market, providing the basis for price increases.

Insufficient imports: In addition to domestic supply constraints, the shortage of imports has also exacerbated market tensions. According to customs data, China's imports of PMMA in the first quarter of 2024 fell by 1.25 year-on-year, especially in February, when imports contracted by 37% year-on-year. This makes the domestic market in the face of domestic supply shortage, but also face the double pressure of import supply reduction.

Figure 2 Year-on-year change rate of PMMA in China in the first quarter (unit: wt)

2. Impact of peak maintenance season:

the impact of seasonal maintenance: in March every year, China's chemical industry enters the peak maintenance season. During this period, many chemical plants will be overhauled one after another to ensure the normal operation of the equipment and extend its service life. The production devices of MMA and PMMA are no exception. Some units of Jiangsu Serbon, Mitsubishi Chemical, Roma Chemical and other enterprises began to be overhauled, resulting in a decrease in the overall operating rate and a decrease in market supply.

Impact of maintenance on supply: During the maintenance period, due to the shutdown or reduction of production of some units, the market supply will be reduced accordingly. This reduction is directly reflected in market prices, pushing prices up. At the same time, the uncertainty during the maintenance period will also aggravate the speculation atmosphere in the market and further push up the price.

3. Export growth:

increase in export volume: According to customs data, China's export volume of PMMA increased by 7.2 year-on-year in January-March 2024. Among them, the export volume in January was about 2600 tons, and in March, the export volume increased rapidly to about 5100 tons. This increase in export volume has not only digested part of the domestic production capacity, but also eased the supply pressure on the domestic market.

The impact of export growth on prices: The impact of export growth on the domestic market is two-way. On the one hand, it reduces the supply in the domestic market, thereby pushing up prices; on the other hand, it also increases the sales revenue and profits of enterprises, and improves the production enthusiasm of enterprises. However, in the current market environment, export growth is more driving up prices.

Figure 3 Theoretical profit fluctuations of PMMA in China (in yuan/tonne)

there is a close industrial chain relationship between MMA and PMMA. MMA is one of the main raw materials of PMMA, and its price changes have a direct impact on the production cost of PMMA. However, in terms of value transmission, there are obvious differences between the two. Although the rise in MMA prices has driven up the cost of PMMA, the rise in PMMA prices is more supported by downstream consumer market demand. This difference has led to a certain degree of squeeze on the production profits of PMMA against the backdrop of rising MMA prices.

according to statistics, from 2021 to May 2024, the theoretical profit margin of PMMA in China has been reduced by more than 3900 yuan/ton. This data intuitively reflects the impact of MMA price increases on PMMA production profits. Especially in the first quarter of 2024, with the continuous rise of MMA price and the weak growth of downstream consumer market, the production profit of PMMA was further compressed. This narrowing of profit margins not only affects the profitability of the enterprise, but also increases the business risk of the enterprise.

Although the price of the MMA-PMMA industry chain is still strong in the short term, considering the limited support of the consumer market and the continued high operation of MMA prices, it is expected that MMA prices are unlikely to rise further. At the same time, with the continuous strengthening of national environmental protection policies and the adjustment and optimization of the PMMA industry structure, the production cost of PMMA is expected to be reduced to a certain extent. However, in the case of large fluctuations in raw material prices, PMMA manufacturers still need to remain vigilant and reasonably adjust production and business strategies to respond to market changes.

Source: Chemical Flathead Brother

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