Nitrocellulose supply continues to be very tight globally. Price pressure is increasing as well with increases implemented in the double digit range from most suppliers for Q2. If demand continues and cotton/wood pulp prices remain at elevated levels, there will be additional increases for Q3. Wood pulp producers are having production issues. The cotton linters growth was stronger in 2010 but the overall amount released to the market has not increased, allowing the value to increase for the farmers. In addition, cost driven challenges on cotton (floods in Pakistan and similar crop issues elsewhere) and the increased costs for wood pulp (demand) have had a significant upward impact.
There was a significant explosion at a European supplier’s facility this month. They supply approximately eight percent of the global market. This will most likely create additional turmoil with supply as well as accelerated price increases.
The overall growing demand of nitrocellulose coupled with higher value markets, such as pharmaceutical, cosmetic and explosives industries competing for nitrocellulose has caused a steady rise in cost.
Crude Oil and Natural Gas
The US EIA expects that oil markets will continue to tighten over the next two years given robust growth in global oil demand resulting in a drawdown of world oil stocks and a reduction of surplus crude oil capacity. World crude oil pricing will remain dependent on several factors including continued unrest in the Middle East and North Africa and its potential impact on supply; decisions by key OPEC member countries regarding their production response to the global increase in oil demand; and the rate of economic growth, both domestically and globally. Natural gas inventories remain high during 2011 but market begins to tighten and prices increase slightly in 2012 as industrial growth improves.
Soya pricing has continued to trade up at the Chicago Board of Trade due to high demand and the link to crude oil (bio diesel). Linseed and soya oil are keeping pace with petroleum oil. Linseed is tight, with elevated prices based on low plantings levels in 2010. Initial planting estimates for this year show a return to normal acres however recent weather issues in the U.S. could have an impact. It is important to note that farmers in Canada have planted significantly less this year which will likely cause increasing prices.
Soy oil has keenly felt the devalued US dollar as managed money pour dollars into commodities. A large South American harvest is coming into bins, and the US is just kicking off the planting season (with cold wet weather pushing us a week or two behind normal averages)
Colored Organic Pigments
Due to the supply rationalization that occurred during the economic downturn and the significant increase in organic pigment demand for higher end market segments, there is a tight global supply for organic pigments and key raw materials used to manufacture the pigments. In addition, the increased costs of environmental and regulatory compliance as well as high oil prices have increased the cost of basic chemicals and other raw materials (e.g. copper trading at an all-time high on the London Metals Exchange) used to manufacture pigments. The expectation is that this trend will continue throughout 2011.