FocusAsia’s acetic acid hits four-month high on tight supply

01 April 2009 08:23  [Source: ICIS news]

SINGAPORE (ICIS news)--Northeast Asia’s acetic acid spot values rebounded by a hefty 23% to four-month highs of around $400/tonne (€300/tonne) by the end of March following shutdowns and operating rate cuts at several plants across the region, market participants said on Wednesday.

This was a marked improvement from February levels, which traded at a seven-year low of around $325/tonne CFR (cost and freight) northeast (NE) Asia.

Widespread operating rate cuts since the fourth quarter of 2008 were likely to keep spot supply tight into the second quarter of 2009. Production had been affected by upstream carbon monoxide (CO) plant problems, natural gas supply shortages as well as impending shutdowns.

"Spot supply is tight now and we were told by our supplier that there would only be second half April cargoes available," a Nanjing-based trader said.

Acetic acid output from global producer Celanese’s 600,000 tonne/year plant in Nanjing had been limited in March due to concerns over the quality of feedstock coal supplies. Output levels were reported to have resumed at full capacity, according to sources close to the company. However, production at the facility was expected to be reduced again this month in line with an impending shutdown at the producer’s upstream CO unit this month, they added.

"Even though overall demand is just so-so, domestic acetic acid prices could be raised because of limited supply and reduced operating rates," a Jiangsu-based producer said, adding that prices could increase further as local producers withhold offers for bulk lots in anticipation of further price rises.

Southeast Asia likewise saw spot acetic acid supply curbed by production issues at plants in Malaysia and Singapore, which propelled prices to four-month highs of around $410/tonne CFR SE Asia at the close of business last Friday from around $370/tonne CFR SE Asia – a seven year low – in January and February.

Feedstock CO supply issues at Celanese’s 500,000 tonne/year Singapore unit in March had also capped acetic acid output. Plant mechanical problems at Petronas’ CO facility resulted in BP Petronas Acetyls (BPPA) declaring force majeure this week on acetic acid supplies from its 535,000 tonne/year plant at Kerteh, Malaysia. This followed intermittent shutdowns since mid March.

Although operations at Celanese’s Singapore unit were reported to have resumed at normal rates and regional end-users reported limited impact on April term deliveries, there were concerns about May allocations due to uncertainty over whether the regional production problems could be resolved soon.

In south Asia, prices also rose 13% from lows in November 2008 to a four-month high of $395-410/tonne CFR S Asia last week on strong demand for imports in India ahead of the impending maintenance shutdown of key local producer Gujarat Narmada Valley Fertilizers Company’s (GNFC) facility in mid April.

While spot availability from southeast Asia into India had dried up, a sales tender for Iranian cargoes was expected to be issued this week after the New Year holidays in the country. The last deal for Iranian-origin material prior to the holidays was reported at $370/tonne CFR India, for a 2,000 tonne end-March loading parcel.

Operating rates at Fanavaran Petrochemical Company’s 150,000 tonne/year plant at Bandar Imam, Iran, were reported to be stable at around 73%.

Acetic acid is used largely in the production of vinyl acetate monomer (VAM), which goes into paints, adhesives, textiles, paper, films and chewing gum. The second-largest and fastest-growing outlet is purified terephthalic acid (PTA), used in polyethylene terephthalate (PET) bottles and polyester fibers.

Major acetic acid producers in Asia include Celanese, BP, Jiangsu Sopo, Shanghai Wujing, CPDC, GNFC and Daicel Chemical Industries.

($1=€0.75)

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By: Helen Lee
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