Higher feedstock prices and tighter market boost prices

28 February 2000 00:00  [Source: ICB]

European acetyl prices are recovering, supported by higher feedstock prices and a tighter global market. According to Bill Tollett of Tecnon UK, the low end of the T2 quarter one contract range in Europe for acetic acid has moved up to around DM930/tonne FD, an increase of DM50/tonne on quarter four, and to around DM1390/tonne for VAM. For quarter two, producers are already indicating that prices will need to rise further in line with higher energy costs. But while firmer crude oil and ethylene feedstock costs are supporting the current price initiative, methanol prices remain depressed.

Players attribute the improved market arena for acetyls to the delayed startup of the 400 000 tonne/year BP Amoco acetic acid unit in Kerteh, Malaysia, coupled with operating problems at various other world plants. For instance, BP Amoco's Texas City plant suffered an outage of around 30 days at the start of the year which also impacted Union Carbide's VAM production. At the same time, Celanese has been closing older, less efficient, capacity as part of its rationalisation programme, but also ahead of the startup of its new 500 000 tonne/year acetic acid plant in Singapore which is scheduled to come onstream in July of this year. It has already closed a 180 000 tonne/year unit in Frankfurt, Germany, and plans to cease production at Celaya, Mexico, by the end of the year. Some sources believe further closures could also be in the pipeline.

VAM supply is described as tighter than acetic acid, and producers argue that capacity additions in this sector are not keeping pace with demand due to poor investment economics. They claim margins must be raised in order to attract new investment and to avoid paying higher prices in the longer term.

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