OUTLOOK ‘10: China and US demand recovery to fuel butac market

29 December 2009 09:15  [Source: ICIS news]

By Helen Lee

SINGAPORE (ICIS news)--Asia’s butyl acetate (butac) solvent market is poised for a recovery in the second half of 2010, fuelled by robust growth in China and an improving US property market, producers said on Tuesday.

Margins in 2009 were wiped out as demand for the solvent from the downstream wood coatings and automotive paints sector had disappeared after the global economic downturn.

“Based on China’s GDP growth in 2010 projected to be 7-9% and the US property market improving on paper, the butyl acetate market will be better in the latter half of 2010,” a southeast Asia-based butyl acetate producer said.

Operating rates at Asian butyl acetate plants were expected to rise to above 50% of capacity in 2010, from the average of 30-50% in 2009, market players said.

“Supply is always there so it still boils down to demand,” the producer said, adding that major producers in southeast Asia had been operating at half the capacities in 2009 as they could not find markets to export their cargoes after meeting domestic demand.

Producers also expected spreads between n-butanol feedstock and butyl acetate prices to hover above $50/tonne (€35/tonne) next year, although n-butanol costs were expected to remain high going into 2010 on the back of firm upstream propylene values.

“Currently the spread between butyl acetate and n-butanol is still not very healthy here in Asia,” the southeast Asian producer said.

The seller added that it was currently targeting the China market for January bulk shipments as domestic butyl acetate prices were able to keep up with n-butanol feedstock cost increases, unlike in southeast Asia.

Offers for bulk cargoes to China were pegged above $1,200/tonne CFR (cost and freight), versus southeast Asian buying ideas capped in the mid $1,100s/tonne CFR SE Asia.

On the other hand, the availability of competitively-priced butyl acetate cargoes from China may also decline in 2010 due to escalating feedstock n-butanol costs and dwindling domestic inventories, an eastern China-based producer said.

China exported 18,878 tonnes of butyl acetate in the first eleven months of 2009, up 36.29% from the 13,851 tonnes shipped out during the same period a year ago.

($1 = €0.70)

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By: Helen Lee
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