US INEOS makes further ACN cut

18 July 2008 17:43  [Source: ICIS news]

HOUSTON (ICIS news)--Higher feedstock costs and demand destruction led INEOS to cut its production rate by an additional 10%, leaving its plants at 60% of capacity, while Cytec has also cut production, the companies said on Friday

The INEOS announcement came after the company’s decision last week to scale back operations by 30%.

INEOS will still meet its contract customers’ orders, but will avoid the spot market until customers’ can meet higher asking prices or the costs of raw materials retreat from record-high levels, a company representative said. 

The 10 cents/lb increase for July propylene brought squeezed producers’ margins to the breaking point, while customers retreated from price hikes manufacturers introduced, the source said.

ACN spot prices were assessed at $1,975-2,020/tonne (€1,244-1,273) on 11 July, according to global chemical market intelligence service ICIS pricing. Production costs are said to be around $2,300/tonne.

The company has not sold material in the normally active ACN spot market for about six weeks. As such, it will further reduce production at its Green Lake plant in Texas and its Lima line in Ohio, which have nameplate capacities of 460,000 tonnes/year and 200,000 tonnes/year, respectively.

Buyers and traders have been saying for weeks that the higher prices are untenable, as the US economic downturn eats away at their own customer base. Acrylic fibre (AF) plants have cut back their own production or shut down, while demand from acrylonitrile-butadiene-styrene customers remains lacklustre compared to last year. 

The problems facing INEOS are widespread throughout the ACN market.

Meanwhile, Cytec Industries said it reduced production last week at its 227,250 tonne/year Fortier plant in Louisiana by 25% after seeing the latest hike in propylene costs. The company basically took itself out of the spot market until customers were willing to pay more for material or raw material costs subsided, a source said.

Cytec CEO David Lilley said on Thursday that the company had increased ACN prices by 46% in the second quarter, a move that he said was leading to demand destruction in the market.

ACN manufacturers around the globe have felt the pinch, as companies in China, Japan and Korea have also announced further cuts.

($1 = €0.63)

For more information on ACN visit ICIS chemical intelligence
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By: Ben Lefebvre
+1 713 525 2653

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