INEOS cuts ACN production by 30%

10 July 2008 17:31  [Source: ICIS news]

HOUSTON (ICIS news)--INEOS, the largest acrylonitrile (ACN) producer in the US, will cut production for the material by 30% as skyrocketing feedstock costs and lagging demand have taken a toll on profitability, the company said on Thursday.

The company, which represents 60% of US production capacity, said the reduction will take place immediately at its 460,000 tonne/year Green Lake plant in Texas and its 200,000 tonne/year Lima line in Ohio.

The move came as the company failed to convince customers to agree to the $2,400/tonne price it deemed necessary to maintain profitability, a source close to the situation said.

Producers had until recently succeeded in  passing soaring feedstock propylene costs through to customers, pushing spot prices to $1,975-2,020/tonne (€1,264-1,293) FOB (free on board) US Gulf on 13 June, according to global chemical market intelligence service ICIS pricing.

ACN sales hit a wall soon after, however, with no spot deals being heard for a month. Producers said they faced total raw material costs as high as $2,318 tonne, a number that looked to go higher as July propylene prices rose by $220/tonne on the back of escalating crude oil values. 

Meanwhile, buyers said they had inventory to spare as demand from their downstream fibre customers dried up in the general economic downturn.

 “Businesses have slowed down, but haven’t switched to cotton or polyester,” one buyer said. “We haven’t seen a loss of applications - it’s more of an economic slowdown,” one buyer said. 

Acrylonitrile-butadiene-styrene (ABS) demand could follow suit, as customers said they are having a hard time swallowing price hikes brought about by historically high butadiene (BD) costs.

The decline in production has become industry-wide. Japanese major ACN producer Asahi Kasei announced on Wednesday that it would reduce its production rates by the end of July. US producers Cytec and Solutia – which is looking to divest its ACN-producing nylon segment due to poor profitability – also reduced their ACN production rates, buy-side sources said, although both companies declined to verify the matter.

($1 = €0.64)

For more information on ACN visit ICIS chemical intelligence
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For more on INEOS’ ACN facilities visit ICIS plants and projects

By: Ben Lefebvre
+1 713 525 2653

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