Europe ACN spot market weakens on lower demand

02 July 2010 23:59  [Source: ICIS news]

LONDON (ICIS news)--European acrylonitrile (ACN) spot prices were assessed down by $50/tonne (€40/tonne) this week on weaker demand in the downstream acrylic fibre sector, market sources said on Friday.

While liquidity in the ACN spot market was non-existent due to a lack of demand and supply, the tone was bearish due to the significant downturn in demand, particularly in Asian markets and most notably in China.

Prices were assessed down by $50/tonne at both ends of the range to $2,250-2,300/tonne CIF (cost, insurance and freight) WE (western Europe), according to ICIS, on market sentiment. Offers were consistently heard in this range.

Talk centred on a market crash, particularly in the fibres market, due to producers’ attempts to pass on higher ACN costs, which were leading to demand destruction in multiple markets.

“There is a lot of pressure for prices to fall,” said one seasoned trader. “There is absolutely no demand from fibres worldwide – I couldn’t call the market [price] now because there is no activity.”

“The market is in limbo,” said another trader. “Buyers now expect further major drops in prices so buying interest is limited.”

Fibre demand was acceptable in Europe - although some said it was beginning to tail off - and some said that the market could absorb further increases.

However, Turkey, Asia (particularly India and China), Latin America and the Middle East were all witnessing a significant slowdown in demand. One fibre producer said it had witnessed a drop in demand in these regions of 30-40%, due entirely to the recent hike in fibre prices.

This was leading to buyer reluctance to take positions on ACN cargoes other than for prompt arrival.

“Demand for fibre is weak everywhere, first in Asia and now Europe,” said a fibre producer.

“Everyone is expecting a price correction,” the producer added.

“The driver for the recent price hike in ACN has been Asia but Chinese demand has collapsed,” said the producer.

Acrylic fibre producers were running at various rates. One said it would cut output by 40% in July on slack demand. Another said it was running at 100%, but only to satisfy old business following an earlier shutdown in May. For this producer, August was a concern as fibre demand was highly uncertain.

In response, some fibre producers had begun to cut prices, due to the substitution away from fibre to polyester and cotton.

All agreed supply was limited, with one trader saying he could not secure a single kilo in the spot market. Two major producers said they had virtually no availability for spot.

However, this was of limited influence as demand was non-existent in any case. Traders argued the market now needed stability following a price correction downwards. However, at present, producer inventories were very low hence there was no need to chase business at lower levels yet.

Some traders saw the current situation as temporary, and that structurally the ACN market was still short globally and that prices could not drop sufficiently to make current Asian fibre prices workable. Hence, a price rebound could take place after the third quarter. Traders further argued that this should be the peak time for fibre demand.

Demand for ACN from ABS and other applications was generally described as healthy, sources agreed.

($1 = €0.80)

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By: Mike Nash
+44 20 8652 3214

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