E China etac demand drops on tainted milk case

24 September 2008 09:26  [Source: ICIS news]

SINGAPORE (ICIS news)--Ethyl acetate demand in east China could drop on the recent melamine-tainted milk scandal as up to 40% of the solvent goes into the printing ink used on food packaging materials, an east China-based acetic acid producer said on Wednesday.

"The melamine-tainted milk scandal which hit dairy organisations like Yili Group will also hit ethyl acetate demand because up to 40% of the solvent is used in the printing ink on consumer goods packaging," a Jiangsu-based major acetic acid producer said in Mandarin.

East China domestic ethyl acetate fell by yuan (CNY) 300/tonne ($44/tonne) from August second half levels to CNY7,200-7,300/tonne ex-tank this week.

"Demand remains generally weak and the sales volumes this week are also weak," the producer said, adding that there were no signs of a pre-National Day holiday stockpiling.

While domestic ethyl acetate producers were yet to cut operating rates or shut down plants, the market outlook appeared bleak unless the exports market improved from the current lull, traders said.

"Margins for domestic ethyl acetate production are still acceptable based on current raw material costs but it is hard to say going forward if the export market remains weak," the producer said.

Offers for cargoes loading in the second half of September declined by $30-40/tonne from a month ago to $1,040-1,050/tonne FOB (free on board) China.

Bids were heard as low as $980-1,000/tonne FOB China, reflecting a $60-80/tonne drop from late August, with buying sentiment weighed down by ample inventories, falling upstream crude and acetic acid values, and weak derivatives demand.

Major ethyl acetate producers in China include Jiangsu Sopo, Shanghai Wujing, Jiangmen Handsome Chemical Development and Shandong Jinyimen Chemical Group.

($1 = CNY 6.81)

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By: Helen Lee
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