Acetic acid producer cites downstream demand drop

03 December 2008 18:10  [Source: ICIS news]

HOUSTON (ICIS news)--A US acetic acid producer said on Wednesday that demand in downstream products began falling just before the nation's Thanksgiving holiday.

"We definitely have seen some reduction in demand," the producer said, noting cancellations of orders for acetic anhydride.

The producer said there is hope in the company that the current downturn throughout the petrochemical industry is an overreaction.

"If consumer spending is down 1%, how does that translate into demand being off 40%?" the producer asked, referring to data released last week by the US Commerce Department, showing that consumer spending fell by 1% in October.

It was the largest decline in consumer spending since September 2001.

The ICIS Petrochemical Index (IPEX) for December plunged 27% to 211.44, eclipsing November's record month-over-month decline and marking a fall of more than 36% since October, when the IPEX was at 331.83.

The producer said the drop in acetic acid and major downstream product vinyl acetate monomer (VAM), as well as many other petrochemicals, has been mirrored to an even greater extent in China.

Having made two trips to Asia this fall, the producer said chemical producers in China, particularly acetic acid producers, are shutting down plants without even pretending to be going through scheduled maintenance.

"China is just closed for business as far as we're concerned," he said.

Prices for acetic acid have ranged from $550-$800/tonne (€435-632/tonne) FOB (free on board) USG (US Gulf) over the past month, according to data from global chemical market intelligence service ICIS pricing.

Prices for VAM have ranged from $1,150-$1,300/tonne USG FOB over the past month, according to data from global chemical market intelligence service ICIS pricing.

Major US acetic acid producers include Celanese, BP and Eastman Chemical. Major US VAM producers include Celanese, Dow Chemical, DuPont and LyondellBasell.

($1 = €0.79)

For more on acetic acid and vinyl acetate monomer, visit ICIS chemical intelligence
To discuss issues facing the chemical industry go to ICIS connect

By: Lane Kelley
+1 713 525 2653

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