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.
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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.
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.
($1 = €0.64)
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