Acetic Q4 price recovery may be slow

26 September 2005 00:01  [Source: ACN]

Producers were forecasting a price recovery for acetic acid in Asia in Q4 2005 after the steep decline in the previous two quarters. Their optimism was based on tightening supply, strong demand and surging natural-gas costs. Also fuelling their upbeat projections was a rise in derivative prices.

But a stand-off seemed imminent last week between Asian acetic acid suppliers and customers over Q4 contract pricing.

Customers contended that the price aspirations of acetic acid producers were unrealistically high. ‘There is some justification for raising acetic acid prices on the back of tight supply, but the nominations should be scaled down in line with our ability to absorb these raw-material costs,’ said a customer.

A buyer from the purified terephthalic acid (PTA) segment pointed out that although PTA prices had been rising in recent weeks, the increases were not sufficient to warrant a huge hike in acetic acid costs. However, a producer contended that PTA prices were high enough to absorb higher acetic costs. PTA prices had risen by US$60-75/tonne last week to US$850-865/tonne cfr NEA from the previous month.

Major acetic acid producers were last week proposing contract price hikes of US$50-110/tonne for Q4 over Q3 nominations.

Celanese has nominated a US$110/tonne increase in its Asian acetic acid contracts for the fourth quarter of 2005, with a trader attributing the hike to tight supply and improving demand. Celanese did not give reasons for the increase and did not disclose its third-quarter settlements.

BP announced a US$50-70/tonne increase in its contract-price target for Southeast Asia (SEA) for October, from US$650-700/tonne cfr SEA proposed for 2H September. September price targets were US$20-60/tonne over the previous month, a BP official said.

The official said that Celanese’s proposed hike was ‘reasonable’ in light of a spate of plant shutdowns and high natural-gas costs in the US in the wake of Hurricane Katrina, as these costs were factored into the contract formulas of US producers.

Showa Denko was also planning to nominate a US$50/tonne increase in its contract price targets for Q3 over Q2 settlements. The producer had just settled its Q2 contracts at US$700/tonne cfr NEA, a rollover of its Q1 settlements. None of the other producers would disclose its Q1 or Q2 settlements, and they were all still negotiating Q3 contracts last week.

‘We could not achieve the US$50/tonne price increase we had targeted in Q2, as PTA markets were not doing well. But now that PTA prices are rising, we think we are justified in raising our price expectations for Q3,’ said a Showa Denko source.

Acetic acid spot prices were at US$600-640/tonne cfr NEA and US$620-640/tonne cfr SEA last week, up US$10/tonne and US$20/tonne from the previous week, according to global pricing agency, ICIS-LOR.

A Japanese trader said that Celanese’s price hike was possibly prompted by tight supply, improving demand from the downstream PTA and vinyl acetate monomer (VAM) segments, and increasing natural-gas costs.

Natural-gas costs touched a record US$12/mmbtu in the wake of Hurricane Katrina in the US, improving sentiment in the Asian acetic acid markets, said the trader. However, oversupply and poor demand from the formaldehyde segment kept Asian methanol prices from rising. But methanol prices were expected to creep up on the back of natural-gas prices, a second trader said.

Also boosting sentiment in acetic acid markets was limited availability. Exacerbating the tightness in Asian markets was a sharp decline in deep-sea cargoes from the US, owing to a force majeure at Lyondell Chemical’s 480 000 tonne/year plant in Texas after a 7-day outage. This has reduced by half the company’s exports to Asia in September, to 4000-5000 tonne. Although the force majeure was lifted after the plant restarted on 16 September, a company official said that it might shut again if Hurricane Rita threatened the safety of the plant.

A spate of turnarounds in Asia in the fourth quarter was expected to tighten supply and strengthen sentiment, said the second trader.

A producer said that Celanese’s 500 000 tonne/year plant in Singapore had not started operating normally following a turnaround in August, owing to problems over supplies of feedstock carbon monoxide. Celanese, however, declined to comment on the news.

Samsung BP Chemicals shut its 450 000 tonne/year unit and its downstream 150 000 tonne/year VAM unit in Ulsan, South Korea, last week for a one-month turnaround.

Daicel Chemical Industries plans to shut its 36 000 tonne/year acetic acid unit in Otake, Hiroshima prefecture, Japan, in November for a one-month turnaround. Its 420 000 tonne/year acetic acid plant in Himeiji, Hyogo prefecture, will not be shut.

Technical problems are delaying the restart this month of China’s Daqing Petrochemical Co’s 100 000 tonne/year plant in Heilongjiang, China, after a turnaround.

Other acetic acid plants in China based on ethylene and ethanol have had to shut down owing to high feedstock costs.

Shanghai Wujing has been facing production problems, owing to a methanol shortage as Shanghai Coking, its methanol supplier, is not running at full capacity.

Commercial production at Formosa BP Chemicals Corp’s new 300 000 tonne/year acetic acid plant in Mailiao, Taiwan, had been delayed by a month to mid-October because of recent typhoons and rain, a company official said.

Also fuelling the bullish market sentiment was the rise in derivative prices. VAM spot prices had risen last week by US$10/tonne to US$860-900/tonne cfr SEA/NEA from the previous week.

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