NF Trading to suspend Ukraine adipic acid production on low margins

07 December 2011 11:08  [Source: ICIS news]

LONDON (ICIS)--NF Trading will halt production at one of its two adipic acid lines in Ukraine within the next 10 days because of unfavourable trading conditions, a company source confirmed on Wednesday.

Each of the two lines at the Ukrainian plant has a nameplate capacity of 30,000 tonnes/year. The line will be shut until March, or until financial conditions improve, the company source said.

The plant is being shut because of low margins and expectations that raw material prices will outstrip adipic acid price increases in the first half of 2012, according to the source.

Adipic acid consumption is low because of year-end destocking, macroeconomic fears and an absence of exports to Asia.

Macroeconomic fears have led to a cautious buying strategy among adipic acid consumers. Deteriorating economic conditions have reduced downstream offtake because of low consumer purchasing power. November 2011 adipic acid consumption was 20% below the same period last year, according to market estimates.

Demand in Asia is weak because of high stock levels in the region, particularly in China. Material from China was being offered into Europe last week at a euro equivalent of as low as €1,200/tonne FD (free delivered) NWE (northwest Europe), exacerbating the supply situation. Asian buying interest is not expected to return until the end of the Lunar New Year in late January.

European adipic acid November contract prices fell by €270/tonne, compared with a €41/tonne ($55/tonne) fall in the upstream benzene contract price, because of weak demand and oversupply.

European buyers are destocking in order to reduce working capital on year-end balance sheets, which has further weakened demand.

In the past few weeks, several European adipic acid producers have said that they are considering suspending production at their plants because of weak demand and low margins. NF Trading is the first of these to have suspended production.

($1 = €0.75)

For more on adipic acid visit ICIS chemical intelligence

By: Mark Victory
+44 208 652 3214

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