FocusAsia acrylates hit new 15-yr high amid global supply shortage

23 September 2010 07:10  [Source: ICIS news]

By Cheong Su Yeen

SINGAPORE (ICIS)--Acrylates spot prices in Asia hit a fresh 15-year high this week and may continue to rise on the back of prevailing tight global supply and strong demand from the derivatives sectors, industry sources said on Thursday.

Glacial acrylic acid (GAA) prices were assessed at $2,550-2,600/tonne (€1,913-1,950/tonne) CIF (cost, insurance and freight) China on 22 September, surging by 27-28% from late July, according to ICIS.

Meanwhile, butyl acrylate (BA) was at $2,650-2,700/tonne CIF China, up 29-30% over the same period, while 2 ethyl hexanol-acrylate (2EH-A) jumped by more than 23-24% to $2,800-2,870/tonne CIF China, based on the same data.

Plant outages in the US and Europe, coupled with scheduled turnaround of acrylate facilities in Asia, caused the tighter-than-expected supply of the material, industry sources said.

“The tight supply is very serious. We have buyers requesting for more and more material every month, but we cannot [supply] as we have very limited [cargoes],” said a regional supplier.

The price spike seen in Asia was far from over, with buyers competing for very limited supply of the material, according to traders.

“I really wish I knew when this [price increases] would end. It is becoming difficult for us to run [our] business. Cost is so high. Business is good but because we have limited products to sell. We had to reduce production rates,” said an end-user.

Acrylates are used in coatings, paint, super absorbent polymers, among others.

Production cutbacks and plant shutdowns in China's Jiangsu and Zhejiang provinces due to a government directive to curtail energy usage and reduce carbon emission were aggravating the tight supply condition.

Chinese acrylates producers were expected to either entirely shut their plants for 10 to 15 days on a monthly basis, or to reduce production by 50%, based on the government mandate that was expected to be in force until the end of the year.

The tight supply has prompted many buyers to scramble for material, fearing a relapse of the sharp spikes in acrylates prices witnessed between December 2009 to May 2010.

Buyers in the region tried to secure as much supply as possible before the long holiday period in China from end-September to early October, which exerted a strong pressure on prices.

Most of them, however, left the trading scene empty-handed even with higher buying indications due to limited availability of the material, market sources said.

“It’s crazy. Every time I ask for offer from suppliers, they will tell me [there is] no cargo [available], said an end-user in Mandarin, adding that suppliers could not even tell when the material would be available.

In June and July, waning domestic demand and poor economics caused acrylates prices in China to plunge by as much as yuan (CNY) 5,200/tonne, pushing a number of Chinese suppliers to divert material to other more lucrative markets such as Europe, the US, south and southeast Asia.

Consequently, inventory levels in China declined to extremely low levels as local producers targeted exports, according to market observers.

“At that time, we could sell [material] on FOB basis and the prices were still better than [selling] in the domestic market on delivered (DEL) basis. Of course, we would prefer to export as much as we could,” said a Chinese producer.

The western regions were in short supply due to a series of plant outages.

Arkema just lifted this week the force majeure (FM) it declared in early August on its 275,000 tonne/year ethyl-acrylate (EA) plant in Carling, France.

Meanwhile, German BASF has yet to lift the force majeure at its 270,000 tonnes/year acrylates plant in Ludwigshafen, which had a technical problem since the start of the month.

($1 = €0.75 / $1 = CNY6.70)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections
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By: Su Yeen Cheong
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