FocusAsia ACN to rise in April on new demand

25 March 2008 04:26  [Source: ICIS news]

By Helen Yan

SINGAPORE (ICIS news)--Demand from derivative acrylonitrile-butadiene-styrene (ABS) and acrylamide (AM) and polyacrylamide (PAM) makers is likely to drive April acrylonitrile (ACN) contract prices in Asia even as downstream acrylic fibre (AF) producers resist,  traders said on Tuesday

The price gap between ACN producers and the downstream AF makers has widened to more than $50/tonne (€33/tonne).

Despite the wide gap, traders said that a price increase for April contracts was highly achievable due to tight supply and rising demand from downstream ABS and AM producers in the second quarter.

 “Demand from the other derivative ABS and AM producers is growing and they can also pay a higher price than the AF makers, so even if demand from the AF makers was to remain flat, the impact on the price hike will be limited,” a Japanese trader said.

Major Japanese ACN producer, Asahi Kasei Chemicals, has proposed $2,020/tonne CFR (cost and freight) Asia for its April contract nomination, up $20/tonne from its March contract nomination.

US producer, INEOS Nitriles, is also expected to announce a modest increase for April.  INEOS settled its March contracts at $1,955/tonne, up $15/tonne from February.

However, buying indications of AF producers, traditionally the major consumers of ACN, were below the $1,900/tonne level.

Taiwanese AF producer, Tong Hwa Fibre, has threatened to slash the operating rate of its 55,000 tonne/year plant by a further 20% to 50% in April, if ACN prices were to continue to rise.

Tong Hwa Fibre has been operating at a reduced rate of 70% in March.

“Our margins have been severely eroded by a weak US dollar, high energy prices and rising production costs. We cannot continue to absorb the rising ACN raw material costs as the AF market is facing tough times,” a Tong Hwa Fibre source said.

Several AF producers in Asia, including Ningbo Rayon, Qinghuangdao Acrylic Fibre and JiMont Fibre have cut operating rates due to squeezed margins from high ACN raw material costs and weak AF prices.

However, China’s growing appetite for ACN is expected to come from the other derivative ABS, AM and PAM producers who will be the main drivers of demand for ACN in the future.

Global demand for ACN in the ABS, AM and PAM markets is set to rise 3-4% in 2008 while that in the AF industry is forecast to fall by 5% in 2008, Asahi Kasei said in a recent industry event in China.

China’s ABS demand grew by 15% last year and double-digit growth is expected in 2008 as well, according to the Japanese major.

Major Chinese ACN producer, the Jihua Group, also said that though the AF market was still sluggish, the increasing use of it in ABS and other derivatives would negate the fall in ACN demand from the AF sector.

“ACN prices will rise in April as the purchasing power of the other downstream Chinese AM and ABS producers is stronger than that of the AF makers,” a Chinese trader said.

He added that he was looking to secure ACN spot cargoes in April to meet the rising demand from the derivative ABS and AM producers.

With supply likely to be tightened in the second quarter amid a spate of ACN plant turnarounds during this period, traders are confident that prices can only trend up in the second quarter.

Several Asian ACN producers, including Asahi Kasei, Tongsuh Petrochemical in South Korea, Jilin Petrochemical in China and CPDC in Taiwan will shut down their plants in the second quarter for maintenance.

($1 = €0.65)

By: Helen Yan
+65 6780 4359

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