Intermediates: Is ACN on the rebound in Asia?

05 December 2011 00:00  [Source: ICB]

After tumbling for six months, spot prices in Asia are rising on limited supply

Asian spot prices for acrylonitrile (ACN) have rebounded from six months of steady decline, and with supply tightening and Chinese buying interest on the rise, they look set to rise further.

In the US and Europe, however, falling propylene prices and weak demand continue to undermine the price of ACN.

ACN spot prices in Asia bottomed out during the week ending November 4, when they were assessed by ICIS at $1,550-1,650/tonne CFR (cost and freight) NE (Northeast) Asia. They ticked upward at the bottom end to $1,600-1,650/tonne the week of November 11, and increased more forcefully during the week of November 18, to $1,650-1,700/tonne.

The November 25 assessment of $1,700-1,750/tonne suggests the trend has considerable momentum. A spate of production cutbacks and plant turnarounds by regional producers has reduced the volumes of ACN available for the spot market.

"We will not sell below $1,750/tonne CFR NE Asia, as we have limited spot availability," said one northeast Asian ACN producer.

"We expect ACN prices to go up to $1,800/tonne CFR NE Asia," a trader said, "as supply is tighter and we have been receiving more enquiries from customers in the past week."

PRODUCERS THROTTLE BACK

Major Asian ACN producers such as Japan's Asahi Kasei, South Korea's Taekwang Industrial, China's Shanghai SECCO Petrochemical and Taiwan's Formosa Plastics Corp (FPC) have been running their plants at only 80% of capacity since October because of weak demand and poor economics.

To cut losses, other ACN producers have shut down production lines entirely. China's Jilin Petrochemical shut down two of its four lines, one in April and the other in early October. Each has a capacity of 106,000 tonnes/year.

Jilin's two other ACN lines, each with a capacity of 120,000 tonnes/year, are running normally, a company source said.

Taiwan's China Petrochemical Development Corp. (CPDC) had planned a November turnaround for its No. 1 line, but the job was pushed forward to early October owing to the poor market. CPDC debottlenecked the No. 1 line, increasing its capacity by 25,000 tonnes to a total of 120,000 tonnes/year, and restarted the plant two weeks ago.

CPDC shut down its 120,000 tonne/year No. 2 line in early November with plans to restart it before the month was out.

Producers in Europe have reduced operating rates, as well, while INEOS shut down its 280,000 tonne/year plant at Seal Sands, UK, for a 40-day scheduled maintenance that has been extended 10 days through the end of November. ICIS assessments have held steady at $1,600-1,750 CIF (cost, insurance and freight) WE (Western Europe) since November 4, and market sources believe prices may have reached a floor.

During the week ending November 25, the spot market was quiet. With end-users likely holding sufficient volumes for the remainder of 2011, few industry sources expected much activity before January 2012, when buyers would need to restock, and most predicted that prices would not change for the rest of this year.

Buyers and sellers agreed that current prices were unsustainable, and European producers refuse to sell any product below cost price of around $1,800/tonne FD.

A similar situation has held in the US, where many producers have decreased inventory through sales and production cutbacks. Although the cost of feedstock propylene continues to fall, producers refuse to lower their own prices in response, a buyer said.

An exporter reported weak demand globally, although he did see cause for hope in rumors that China might ease its monetary policy. On November 23, during a week shortened by the Thanksgiving holiday, the spot price of US Gulf ACN was assessed at $1,665-1,750/tonne FOB (free on board) EXPORT, unchanged from the previous week.

ACN is feedstock for acrylic fibers, which are used in textiles, and acrylonitrile butadiene rubber, styrene acrylonitrile (SAN) and acrylonitrile-butadiene-styrene (ABS), which are heavily used in automotive, appliance and industrial applications.

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