FOCUS: Asian AF producers feel margins squeeze

03 July 2006 08:24  [Source: ICIS news]

SINGAPORE (ICIS news)--Asian acrylic fibre (AF) producers plan to slash operating rates if the feedstock acrylonitrile (ACN) prices continues to rise unabated, industry sources said on Monday.

ACN prices have risen continuously over the past few months, with nominations for July contracts about $200/tonne higher than May settlements at above $1,600/tonne CFR Asia.

Asahi Kasei Chemicals, the Asian ACN major, has raised July contract nominations by $30/tonne to $1,630/tonne. This comes on the heels of a hefty $100/tonne hike for June contract nominations.

Asian AF producers have been hard hit by the high ACN costs, prompting some of them to consider lower operating rates.

Taiwan’s Tong Hwa Synthetic Fibre has taken the lead and indicated its intention to cut operating rates at its 50,000 tonnes/year plant in Hsinchu, saying that margins have been severely eroded by escalating feedstock costs.

“We can’t absorb the feedstock costs and are unable to pass them onto our customers,” said a company official.

Producers in Southeast Asia, India and China are also contemplating a similar move.

“We are being pushed to the limit by the escalating raw material costs and really have no choice but to either reduce operating rates or shut down,” said an Indian AF producer.

There was talk that Qinghuangdao Acrylic Fibre, a Chinese producer, could be forced to shut down its 65,000 tonnes/year plant as its margins have been wiped out by rising feedstock costs. The company could not be reached for comment.

“The plant is operating at a loss, given the high raw material costs and weak AF prices, and market players are wondering how long they can continue to operate given its mounting losses,” said sources close to the company.

AF prices have only recently started to strengthen to around $1.95/kg, up from around $1.85/kg about two months ago. However, major ACN producers have pegged July contract offers at $1,580-1,630/tonne against notional bids at $1,450-1,500/tonne.

Negotiations for July contracts remained deadlocked due to a widening price gap separating buyers and sellers, and the stand-off continues.

By: Helen Yan
+65 6780 4359

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