FocusAsia acrylates prices firm on high feedstock, tight supply

02 September 2009 09:17  [Source: ICIS news]

By Ng Hun Wei

SINGAPORE (ICIS news)--Acrylates prices in Asia are keeping firm despite strong buyers resistance due to high feedstock costs, tight suppy and arbitrage opportunities, traders and producers said on Wednesday.

Prices of glacial acrylic acid (GAA) in Asia rebounded by more than 45% to hit around $1,325/tonne (€927/tonne) CIF (cost , insurance and freight) CMP (China Main Port) last week since hitting a low of $910/tonne CIF CMP in January.

Similarly, prices of other acrylate esters, including butyl acrylate (BA) and 2-ethylhexyl acrylate (2 EH-A) have risen 26-27% over the same period, according to global chemical market intelligence service ICIS pricing.

Acrylates producers in northeast and southeast Asia have proposed monthly increases of around $70/tonne for September-arrival material and some already had their offers accepted.

"Negotiations are still ongoing (for some customers) but producers are very reluctant to back down at the moment. It seems unlikely that they will slash their offers," said an Asian BA trader.

Traders said the price surge was not affected despite the slowing demand in parts of Asia, particularly southeast Asia. Operating rates at downstream units slightly dip in Muslim-majority countries during the fasting month of Ramadan, which started late last month, they added. The downstream plants make detergents, adhesives and paints.

Demand was also low in Thailand due to a seasonal lull, another trader said.

An acrylates producer based in southeast Asia said it was natural to see buying resistance. "But with the feedstock prices still at such high levels, we cannot afford to lower prices any further.

A sharp rise in cost of feedstock propylene was the major factor squeezing production margins, producers said. Propylene prices surged by 88% since the start of the year to $1,088/tonne CFR NE Asia and acrylates producers said they were still struggling to pass on this increase to their customers.

"It’s not a question of whether we should increase or lower our prices. It’s whether we should increase prices or cut operating rates," said the southeast Asian producer.

Asian producers were able to avoid cutting production rates so far because of overall tight supplies caused by scheduled turnarounds in many plants and arbitrage outflows from the region, market players said.

Formosa, BASF-Petronas and BASF-YPC were scheduled for maintenance shutdowns in September and October while Japanese producers Nippon Shokubai and Toagosei had just completed their turnarounds. Korea’s LG Chem had resolved only some production problems recently and currently had to cater to a seasonal pick-up in the domestic demand, market players said.

High acrylates values in Europe had also strengthened their case for higher prices in Asia, producers said. Production issues in Europe had driven up BA prices by 33% since late-May to around $1,775/tonne free delivered, creating attractive arbitrage opportunities for Asian producers, market players said. It was only in early-May that Asian prices were higher than European prices, a northeast Asian producer noted.

"If Asian customers cannot accept our prices, we can always export some material to Europe," the producer added.

Traders and producers noted rebounding values in the Chinese domestic market and India’s import market in recent weeks had also exerted further upward pressure on prices, allowing sellers to stick to their high offers, traders and producers noted.

"With the high propylene price and their low export allocation, I think producers in Asia would rather do less business in Asia than to lower their offers," a acrylates trader said.

($1 = €0.70)

For more on acrylates visit ICIS chemical intelligence
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By: Ng Hun Wei
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