OUTLOOK ’11: Asia adipic acid to hold steady on balanced market

07 January 2011 04:01  [Source: ICIS news]

By Heng Hui

Adipic acid is used to make resins for shoe solesSINGAPORE (ICIS)--Asian adipic acid (ADA) prices are expected to remain stable-to-firm this year as strong downstream demand would be balanced out by new capacity and largely steady feedstock costs, according to industry sources.

Spot prices of ADA were assessed at $2,650-2,700/tonne (€2,041-2,079/tonne) CFR (cost & freight) northeast (NE) Asia on 5 January, unchanged from December 2010 levels, ICIS data showed.

The product’s prices had risen steadily from around $1,950-$2,000/tonne in January 2010 on the back of strong demand from the downstream nylon and polyurethane (PU) industries, and tight ADA supply, which was due to the low run rates in that sector.

Market players said ADA prices were expected to remain firm in 2011, as the robust performance in the downstream nylon sector would continue well into the year.

Regional demand for ADA was estimated to be at around 800,000-900,000 tonnes in 2011, buoyed by nylon makers who consume nearly 70% of the material produced in Asia.

ADA is also used in the manufacture of polyurethanes, plasticizers, hexamethylene adipate, thermo polyurethanes and resins for shoe soles.

Asia’s production capacity of around 1m tonnes/year of ADA was sufficient to meet current demand, said players.

Adding to that capacity is China’s Shandong Hualu-Hengsheng Chemical, which is scheduled to start up its new 160,000 tonne/year ADA plant at Dezhou in Shandong province by the end of 2012

In addition, Chinese producer Shanxi Yangmei Fengxi Fertilizer Industry is expected to run its new 100,000 tonne/year ADA unit at Yuncheng city, Shanxi province by the end of 2011.

As a result, China could become a net exporter of the product, as production would exceed ADA consumption in the Asian giant, estimated at around 500,000 tonnes/year, players added.

The country accounts for the majority of Asia’s ADA production and currently produces an estimated 730,000 tonnes/year of the material.

However, a major Asian producer told ICIS most of the ADA plants in Asia have not been operating at full rates due to a lack of key feedstock cyclohexanol this year.

On the other hand, feedstock benzene costs have been hovering at around $800-1,000/tonne FOB (free on board) Korea in 2010 and producers were already enjoying healthy profit margins of around a few hundred dollars a tonne, given conversion costs at around $900/tonne, said buyers.

The balance of the demand and supply fundamentals should help to keep ADA prices stable-to-firm this year, they said.

($1 = €0.77)

For more on adipic acid, visit ICIS chemical intelligence
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Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Heng Hui
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