02 September 2010 08:29 [Source: ICIS news]
By Helen Lee
The market remained long in supply even with the forced shutdown of some plants due to spikes in prices of feedstock methanol, they said.
Chinese domestic acetic acid prices had been stagnant since mid-July, moving within a 7% range between yuan (CNY) 2,750 ($404/tonne) and CNY2,950/tonne ex-tank. This came after prices shed 7.5% from highs of CNY2,900-3,100/tonne ex-tank in the middle of May.
Market players pointed to the aggressive capacity additions in recent years for the supply glut that was depressing prices since 2008.
“Acetic acid supply remains abundant and sales volumes have not been good whereas methanol raw material prices have now surpassed acetic acid prices in certain areas and yet competition is stiff,” said an official at major producer Jiangsu Sopo.
At least 2.4 m tonnes of new capacities had been added in Asia and the Middle East since 2008, with
Meanwhile, high methanol prices were pushing up the cost of production for most acetic acid makers while their power to raise prices were being limited by poor demand, industry sources said.
Chinese domestic methanol values were last assessed by ICIS at CNY2,350-2,500/tonne ex-tank on Friday, squeezing the margins for acetic acid makers, which were selling cargoes at CNY2,650-2,850/tonne ex-tank on Tuesday in the
To generate decent margins, acetic acid makers require the prices of their material to be at least CNY500/tonne higher than methanol values, market sources said.
Prices of acetic acid in the
Material originating from the
Realising that there was not enough demand to absorb all the supply in the market, Jiangsu Sopo decided to cut production at its 600,000 tonne/year plant on 29 August, currently running the plant at just around 80% of capacity, said a company official.
He said that the company had high inventories due to poor sales.
Operations at the plant had not been stable about two months prior to the production cut due to issues with feedstock supply, the official said.
Separately, Henan Shunda shut its 300,000 tonne/year acetic acid plant in
But market participants speculated that the dismal market environment was the principal reason for Henan Shunda’s week-long plant shutdown.
Acetic acid is largely used in making vinyl acetate monomer (VAM), which has applications in adhesives, textiles, paints and paper.
Hopes that demand would improve from downstream VAM, purified terephthalic acid (PTA), solvent acetate and monochloroacetic acid (MCA) sectors were dim given the supply surplus in the acetic acid market, local players said.
“It is a situation of making a tonne and losing a tonne,” said the official from Jiangsu Sopo.
Major acetic acid producers in
($1 = CNY6.81)
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