FocusAsia ACN makers cut rates on margin dip

16 July 2008 04:27  [Source: ICIS news]

By Helen Yan

SINGAPORE (ICIS news)--Several major Asian acrylonitrile (ACN) makers have cut operating rates as margins have been squeezed or wiped out by weak demand and soaring upstream energy and feedstock prices, producers said on Wednesday.

Producers including Asahi Kasei of Japan, Taekwang Industrial of Korea and Chinese Petroleum Development Corp (CPDC) of Taiwan, have or will cut operating rates in July and August.

Major US producer, INEOS Nitriles, which supplies to the Asian market, has reduced production at its US facilities by 30%, saying that its margins have been wiped out.

“We will reduce our production by 30% until the market recovers,” a source at INEOS said.

Asahi has slashed operating rates at its plants in Kawasaki and Mizushima by 15% while Taekwang has reduced the operating rate of its 250,000 tonne/year ACN unit in Ulsan by 5%.

Asahi Kasei operates two ACN lines at Mizushima with a combined capacity of 300,000 tonnes/year and another 150,000 tonne/year unit at Kawasaki in Japan. It has a total ACN capacity of 450,000 tonnes/year in Japan.

Taiwanese producer, Chinese Petroleum Development Corp (CPDC) will shut one line in August for nine days and another line for 20 days. Each line has a capacity of 95,000 tonnes/year.

INEOS settled its July contract with major Asian customers at $2,150/tonne CFR (cost and freight) Asia, up $35/tonne from its June settlement of $2,115/tonne. Despite the increase, INEOS said margins had been wiped out by high energy and raw material costs.

“We have negative margins as our production costs have gone up to $2,300/tonne and we cannot continue to run at full rates and operate at a loss,” the INEOS source said.

The US July chemical grade propylene contracts have been settled 10 cents/lb ($220/tonne) higher at 83.5 cents/lb. With ammonia at $585/tonne, production costs of US ACN makers have climbed up to around $2,300/tonne.

INEOS runs a 460,000 tonne/year ACN plant at Green Lake in Texas and a 200,000 tonne/year unit at Lima in Ohio in the US.

Asian ACN producers also said that their margins have been squeezed and that the offers for August are pegged at $2,200-2,300/tonne CFR Asia.

However, buying interest has been limited, given the lacklustre downstream acrylic fibre and acrylonitrile-butadiene-styrene (ABS) markets.

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By: Helen Yan
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