FOCUS: China ACN prices drop despite producers' efforts

16 December 2005 06:39  [Source: ICIS news]

By Helen Yan

Acrylic fibres are used in carpetsSINGAPORE (ICIS news)--Despite efforts by major acrylonitrile (ACN) producers to keep prices above $1,500/tonne CFR Asia, domestic acrylonitrile prices in China have continue to fall due to the weak downstream, acrylic fibre (AF) market, traders and producers said on Friday.

China’s Jihua Group was the latest to announce cuts - reducing prices by Rmb300/tonne to Rmb12,500/tonne ex-works on Friday, and cutting operating rates to 90% of capacity from 100%. Earlier in the week, Daqing Petrochemical cut prices by Rmb100-200/tonne to Rmb12,500-12,800/tonne ex-works to clear stocks ahead of the end of 2005.

"The AF market has been facing difficult conditions and demand for ACN has dropped, forcing several ACN producers to either cut prices or reduce operating rates," an AF producer told ICIS news.

Japan’s Asahi Kasei Chemicals said last week that it would switch from producing ACN to methyl acrylonitrile (MAN) at its 100,000 tonne/year unit at Mizushima for two months from early January due to downstream demand, though the company did not say if this was related to the weak market as well.

Weak AF market conditions dampened market sentiment and resulted in a stand-off between ACN and AF producers over contract price settlements. ACN producers tried to hike prices by around $150/tonne over the last three months to $1,550/tonne CFR Asia for December cargoes, but they met firm resistance from Chinese AF producers.

Both sides have their own set of problems that could lead to a severe erosion in margins.

ACN producers were forced to implement significant price hikes, after feedstock propylene prices in the US jumped by 10 cts/lb to 49.50 cts/lb in October following the disruption to supply after hurricanes Katrina and Rita.

AF producers, however, had difficulties meeting the price due to weak consumption over the last few months. That has left AF prices languishing at $1,700-1,780/tonne delivered for several months, and forced producers to cut ACN imports - 50% lower in October compared to September - as a result of the problems.

By: Helen Yan
+65 6780 4359

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