FocusChina's acetic acid prices rebound amid plant shutdowns

07 July 2011 04:42  [Source: ICIS news]

By Helen Lee and Sandra Shen

Acetic acid is used in the manufacture of paints and coatingsSINGAPORE (ICIS)--Acetic acid prices in China are on the rebound for the third week running as spot cargoes have dried up amid a spate of plant shutdowns that is expected to keep supply tight through August, market participants said on Thursday.

Despite seasonally weak demand, prices reached a seven-week high at yuan (CNY) 3,700/tonne ($572/tonne) ex-tank on Thursday, an increase of about CNY275/tonne from the close on 1 July, according to ICIS data.

Major producer Shanghai Wujing raised its offers by a hefty CNY500/tonne on Monday to CNY3,700-4,000/tonne ex-tank.

This came after Shanghai Wujing shut its 500,000 tonne/year acetic acid plant at Wujing in Shanghai on 2 July in line with an outage at its upstream methanol plant, sources close to the company said.

The producer had recently completed a two-and-a-half-week long turnaround at its acetic acid plant on 24 June. The current outage is expected to last 10 days, sources said. Company officials could not be reached for comment.

As a result of its shortage of spot molecules, Shanghai Wujing raised its offers and other sellers in eastern China followed suit.

“Offers in the market are high at CNY3,700-4,000/tonne ex-tank but there are no cargoes,” a Jiangsu-based producer said.

Meanwhile, Hebei Chung Shun Chemical delayed the restart of its 500,000 tonne/year acetic acid plant at Xingtai city in Hebei province to 7 July because of its ongoing turnaround, a company official said on Monday.

The company shut the plant on 10 June for its annual turnaround and had originally scheduled to restart the plant on 25 June, the official said.

In addition, Henan Shunda’s 400,000 tonne/year plant located at Zhumadian in Henan province suffered a four-day outage last week because of issues surrounding its supply of feedstock carbon monoxide.

Although the factory resumed production on 3 July and its daily output is around 1,200 tonnes, the producer has no ability to supply cargoes to the spot market in the short-term as it has to first cater to contract customers’ requirements.

Meanwhile, key eastern China-based producer Jiangsu Sopo restarted operations at its two acetic acid plants at Zhenjiang in Jiangsu province early this week, following an unplanned outage on 22 June.

The plants, which have a combined capacity of 1m tonnes/year, are running at 80% capacity.

Nevertheless, the unplanned outage at the company’s plants prevented the producer from participating in the spot market. A company source said that it may cut some of its supply to contract buyers because of its low inventories.

In addition, committed export volumes in July contributed to the shortage of spot lots for the domestic market. Sources said Jiangsu Sopo was scheduled to load at least 15,000 tonnes of acetic acid for export in the first half of July.

Jiangsu Sopo typically exports acetic acid volumes of at least 30,000-50,000 tonnes per month, company officials said.

The unplanned outage of Jiangsu Sopo’s plant had previously arrested the crash in prices in late April, which was brought about by an easing in tight global supply, and sparked off the latest price rebound in late June (please see graph below).

Looking ahead, the turnaround of Shandong Hualu Hengsheng’s 200,000 tonne/year acetic acid plant at Dezhou in Shandong province in August is likely to keep prices afloat, local producers said.

“These fresh plant outages are having a big impact on the market despite the lull demand season,” a Jiangsu Sopo company official said.

Buyers, however, are choosing to adopt a wait and see approach and are cautious in stocking up raw material, given their high product inventories.

Most of them are choosing to broaden their cargo enquiries and monitor offers instead of increasing their purchases of acetic acid at the moment because of weak margins in the downstream markets, traders said.

“We will decide on the acetic acid purchasing volume based on the daily output of our products,” a major diketene producer in Jiangsu province said. It takes 2 tonnes of acetic acid to produce 1 tonne of diketene.

“The traditional off-season is approaching so we will not consider building high feedstock inventory at this high price level,” he added.

The high acetic acid prices, meanwhile, are adding to downstream solvent acetate producers’ woes as they are facing squeezed margins and high product inventory levels at the moment.

These ethyl acetate and butyl acetate producers are in the process of raising their product prices but it remains to be seen if the hike in feedstock acetic acid costs could be passed on because of the prevailing July and August lull season.

Major acetic acid producers in China include Celanese, BP, Shanghai Wujing and Yankuang Cathay Coal Chemicals.

($1 = CNY6.47)

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By: Helen Lee
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