27 February 2012 00:00 [Source: ICB]
Switzerland-headquartered producer INEOS and Netherlands-based producer DSM are running flat out as downstream acrylic fibers plants are running at 100% of capacity. However, there is uncertainty as to how much of this improved demand is because of buyers replenishing depleted inventories rather than a sustained upturn in the market.
ABS demand is a little lackluster because uncertain economic conditions are affecting consumption in the construction sector. However, one producer said that buyers in the ABS and nitrile rubber sectors are increasing their demand forecasts.
Supply, which is described as ample at present, could tighten in the second quarter, however, as several ACN producers in China, Japan, South Korea and Taiwan have scheduled turnarounds during that period, thus limiting spot availability.
The tighter than expected supply coincides with an anticipated increase in demand from the ABS sector in both Asia and Europe. The second quarter is traditionally the strong production season for ABS makers.
However, some buyers warn that, if ACN becomes too expensive, buying interest from fiber and ABS producers will fall away as it becomes increasingly difficult to pass extra costs on to end users.
According to industry sources, European plant capacity is expected to remain steady at around 1.25m tonnes/year until 2015.
Global ACN prices have been on an upswing this year, amid rising propylene feedstock costs, improving demand and limited supply in Asia, and the trend is expected to continue in the second quarter.
Soaring propylene costs have pushed up European February contract prices by €90/tonne ($119/tonne), to €2,040-2,053/tonne FD (free delivered) NWE (Northwest Europe). Spot values, too, have soared, rising by $260-300/tonne to $2,000-2,060/tonne CIF (cost, insurance and freight) WE (Western Europe)from the start of 2012 to mid-February.
In Asia, prices have hit $2,200/tonne CFR (cost and freight) as sentiment firms. Sellers in Europe say that this price level makes domestic ACN very attractive on the international scene and exports to Asia are becoming a viable possibility.
However, European buyers warn that values are shooting up too fast and that the market could see a crash similar to last year's, when, after soaring by $550-650/tonne from January to May to a peak of $2,850-3,000/tonne CIF WE, ACN prices fell back to $1,600-1,800/tonne by November.
The dominant process for ACN production remains propylene ammoxidation, despite attempts to push propane ammoxidation as a feasible alternative.
The former - in which propylene, ammonia and air are reacted in a fluidized bed reactor - remains the most cost-effective method of manufacturing ACN, European producers say, although propane ammoxidation plants are opening in Asia.
PTT Asahi Chemical - a joint venture between Thailand's PTT and Japan's Asahi Kasei - opened a 200,000 tonne/year propane ammoxidation plant in Map Ta Phut, Thailand, last year. However, the plant is said to be feasible only because the propane feedstock is heavily subsidized, according to market sources.
INEOS experimented with a propane demonstration unit in Green Lake, Texas, US, but found it was not cost-effective.
Many players are still unsure how the market will fare in 2012, as the uncertainty surrounding the eurozone debt crisis makes long-term forecasting difficult.
Demand growth from the acrylic fibers and ABS sectors is expected to be largely in line with GDP growth, at around 2-3% in Europe. In Asia it is expected to be much stronger, at around 6-8%.
Several new plants are set to come on stream in the next two years. Mostly, they are located in Asia (South Korea, Taiwan, China) and the Middle East (Saudi Arabia and Iran).
Japanese producer Asahi Kasei is planning to open a 245,000 tonne/year facility in Ulsan, South Korea, in 2013, as well as a 200,000 tonne/year joint-venture project with Japan's Mitsubishi Corp. and SABIC in Jubail Industrial City, Saudi Arabia.
The new company will be called Saudi Japanese Acrylonitrile (SHROUQ), with SABIC owning 50% and the two Japanese partners owning the remainder. A final decision on timing and capital expenditure will be made during 2012.
Upon completion, the two projects will push Asahi Kasei's global production capacity to 1.4m tonnes/year, making it the largest ACN manufacturer in the world.
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