China IPA falls 16% on weak demand, low acetone values

02 July 2010 08:01  [Source: ICIS news]

SINGAPORE (ICIS news)--Isopropanol (IPA) spot prices in China have tumbled 16% from early June due to prevailing supply overhang, sluggish demand and recent declines in raw material acetone values, industry sources said on Friday.

Continued weakness in China demand had also depressed the southeast (SE) Asian IPA market, where values had declined by 10% in the past month, they added.

Spot IPA prices were discussed at $930-1,000/tonne (€744-800/tonne) CFR (cost and freight), northeast (NE) Asia and at $1,050-1,120/tonne southeast (SE) Asia on 2 July, they said.

IPA had been on a downtrend in China since May, when imports of Russian material weighed down on the domestic market, which was flush with supply, players said. This had consequently forced IPA from southeast Asi to fall, they added. (see graph below)

“The [China IPA] market has been slow since the Lunar New Year in February, and we did not see any recovery,” an importer based in east China said in Mandarin.

Consecutive price adjustments by Chinese IPA major Jinzhou Petrochemical was forcing other Asian producers out of the China market, said sources

Jinzhou had lowered its prices to compete with acetone-based IPA producers, said a company official.

“We are pressured by the acetone-based IPA producers in the region. Acetone is really falling rapidly, we have to be competitive in terms of our offers,” the official added.

If acetone values continued to drop, producers of propylene-based IPA like Jinzhou would be squeezed out of the market by acetone-based makers, the official said.

Jinzhou is currently offering its product at yuan (CNY) 8,100-8,200/tonne ($1,195-1,209/tonne) ex-tank in eastern China, which was around $950-970/tonne CFR China, the official added.

While a few Asian producers were able to offer the product at $1,000/tonne CFR China, they failed to match buying ideas at $900-930/tonne CFR China for July shipment, said market sources.

As a result, some Asian IPA producers were shipping cargoes to the SE Asian markets where IPA would soon be in surplus, they added.

“We can’t offer at $1,050/tonne FOB [free on board] NE Asia and below. That will erode our margins. If the market falls beyond this, we will sell propylene instead,” a NE Asia-based producer said.

Some Asian producers were mulling operation cuts to reduce stock pressure, sources said.  

Japan’s JX Nippon Oil & Energy had cut operations at its Kawasaki-based 85,000 tonne/year IPA plant to 75-85% from 21 June and was planning to reduce output further if the market remained bearish, said a source.

Industry sources said they did not expect the China market to rebound in the near future.

“There is no reason for the market to rebound. China will take a few more months to digest the high inventories of 20,000 tonnes. We can practically buy any brand we want in the market now,” a south China buyer said.

“The offers are not low enough to fetch any deals. The market will fall further, looking at how much China has plunged already,” a Thai buyer said.

IPA is used mainly as a solvent in applications such as cosmetics and pharmaceutical products, inks and coatings.

($1 = €0.80/ $1 = CNY6.78)

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By: Ong Sheau Ling
+65 6780 4359

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