OUTLOOK ’12: Asia adipic acid prices unchanged on weak demand

09 January 2012 02:50  [Source: ICIS news]

By Heng Hui

SINGAPORE (ICIS)--Asia adipic acid (ADA) prices look set to remain stable at the current prices which are hovering slightly above production costs amid weak demand, industry sources said.

Operating rates may be lowered because of poor demand in 2012 that is linked to expectations that world GDP will fall, according to market participants.

Asia has a current ADA capacity of above 1m tonne/year, with the majority coming from China, according to data from ICIS.

In December last year, China’s Henan Shenma started up its 50,000 tonne/year plant in Henan province. However, the plant was shut for a short period of maintenance later in the month, and it is uncertain if the plant will continue to operate smoothly, given the weak economic outlook, according to market players.

Meanwhile, Shandong Haili Chemical Industry has delayed the start-up dates for its two new 150,000 tonne/year ADA units at Jiangsu.

The first plant, which was scheduled to be started up in December 2011, will start operations in May 2012, according to a company source. The start-up of the second plant has been delayed, the source said, without giving further details.

Shandong Haili has an existing 225,000 tonne/year ADA facility at Zibo in Shandong province. 

Shandong Hualu-Hengsheng Chemical plans to start up one of two lines at its new 160,000 tonne/year ADA plant at Dezhou in Shandong by January or early February 2012.

Separately, Shandong Hongye Chemical Industrial Group will start up its 140,000 tonne/year ADA plant at Yuncheng in Shandong province in May 2012, according to a company source. The company has an existing 140,000 tonne/year ADA plant at Dongming in Shandong province.

Demand in Asia is estimated to match supply, with derivative nylon production accounting for more than two thirds of the demand, according to sellers.

Other applications of ADA include polyurethanes, plasticizers, hexamethylene adipate, thermo polyurethanes and shoe sole resins. Growth in the other derivatives besides nylon is expected to be in line with the economy at around 0-2%, depending on the downstream sectors, said market observers.

Producers in the region said conversion costs from feedstock benzene were at around $1,000/tonne.

Sellers said that strong Asian currencies, such as the South Korean won, the Japanese yen and the Singapore dollar, coupled with the weak US dollar, are contributing to high production costs as well as supporting high import prices.

However, buyers and sellers said ADA consumption in 2012 is expected to be flat or grow slightly because of the weak global economic outlook.

In the fourth quarter of 2011, prices were at around $1,500/tonne (€1,185/tonne) CFR (cost & freight) NE Asia, with sporadic cargoes being heard sold at $1,400/tonne CFR NE Asia, which falls below the costs of production. This is because of a large influx of material from Europe at extremely low prices as producers were destocking.

However, buyers did not express interest in capitalising on the low prices.

“We bought a little, when prices were low in November-December. However, we are not keen to stock up because of the uncertain economic forecast,” said a buyer in Taiwan.

($1 = €0.79)

For more on adipic acid, visit ICIS chemical intelligence
Please visit the complete ICIS plants and projects database

By: Heng Hui
+65 6780 4359

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