Intermediates: ACN rising on Asia demand, shutdowns and feedstocks

05 March 2012 00:00  [Source: ICB]

Asian spot prices for acrylonitrile (ACN) levelled off halfway through February, but with demand on the rise and supply set to tighten on scheduled plant turnarounds, they are likely to recover their upward trajectory.

London snow, Rex Features

 © Rex Features

Acrylic fiber demand rose as cold weather hit Europe

In the US and Europe, demand from Asia and tight propylene have been driving prices up.

ICIS assessed weekly ACN spot prices at $2,150-2,200/tonne CFR NE (Northeast) Asia on February 24, unchanged from a week earlier. Over the same period, however, offers for March shipment increased to $2,300-2,400/tonne (€1,748-1,790/tonne) CFR (cost and freight) Asia.

Regional ACN facilities in China, Japan and South Korea have been shut for maintenance, tightening supply in the spot market, and a recent plant outage in Taiwan has aggravated the situation, industry sources said.

In China, Anqing Petrochemical's 80,000 tonne/year ACN plant began a 40-45-day maintenance shutdown on February 10. Jilin Petrochemical plans to take its 452,000 tonne/year plant in Jilin offline for a maintenance turnaround in May.

In South Korea, Taekwang Petrochemical shut down its 250,000 tonne/year ACN plant in Ulsan on February 13, with plans to bring it back on line on March 5. In Japan, Asahi Kasei Chemical will shut down its 300,000 tonne/year plant in Mizushima for 40-45 days in early March.

DEMAND ON THE RISE

The tightening of the ACN market coincides with a rise in demand from the downstream acrylic fiber (AF) and acrylonitrile-butadiene-styrene (ABS) markets, fueling the uptick in ACN prices, market participants noted.

"We have received many inquiries for [ACN] cargoes, but we have limited spot availability," a source at Taiwan's China Petrochemical Development Corp (CPDC) said.

CPDC incurred a production loss of 2,000 tonnes because of a recent outage at its 120,000 tonne/year ACN line at Kaohsiung, Taiwan, that lasted about a week.

A colder winter in Asia and Europe this year has led to stronger demand for AF, which is used to make sweaters, carpets, household furnishings and bedding.

AF makers in China and India are running their plants at full capacity to meet the unexpectedly strong demand for the product, industry sources said.

Production of ABS, another major derivative product of ACN, is also being ramped up in China and South Korea.

ABS producers in China have raised the average operating rates at plants from 60% in the fourth quarter of last year to about 80% currently, market sources told ICIS. Producers in South Korea have increased their run rates to around 90%, up from around 80% in the previous quarter.

ACN spot prices have been on an uptrend since November last year, gaining 36% over the past 3½ months, according to ICIS.

In 2011, ACN fluctuated between a high of $2,800/tonne CFR NE Asia, recorded in May, and a low of $1,600/tonne, which came in November.

Domestic ACN prices in China are also on the rise. Since early February, they have increased by about yuan (CNY) 2,000/tonne ($317/tonne) to CNY 17,500-17,800/tonne ex-works.

PRICE HIKES IN US

Because both China and India rely heavily on deep-sea cargoes to meet their domestic ACN requirements, prices in the Asian market are sensitive to conditions in the US, where the cost of feedstock propylene has been on the rise, driving up ACN prices.

Propylene in the US weakened toward the end of 2011, but after January contracts rolled over, February prices leaped up. ICIS assessed February chemical grade propylene (CGP) contracts in the US at 71.00 cents/lb, 16.50 cents/lb over January for a 30% increase.

ACN spot prices have responded, rising from just $1,620-1,650/tonne FOB (free on board) US Gulf at the start of the year to $2,130-2,190/tonne the week ended February 24, a 32% rise.

US ACN US ACN

With freight costs from the US to Asia at around $100/tonne, material from the US Gulf would still be a bargain at $2,230-2,290/tonne CFR Asia.

One US ACN producer expects to see asking prices for spot ACN as high as $2,400/tonne in the near future. If March propylene contracts jump 8 cents/lb, asking prices for ACN could quickly rise to $2,375/tonne, he said.

ACN contract prices for February are also expected to follow any rise in March propylene contracts.

Downstream consumers are worried. For ABS producers, ACN prices are just one concern. The prices of feedstocks butadiene (BD) and styrene have also been rising.

In the AF market, ACN prices are nearing the point where AF producers will find it difficult to maintain operations, industry sources told ICIS.

In Europe, sentiment was bullish, given raw material worries and strong demand from Asia.

VARIABLE VALUES

With February business done, European manufacturers insisted they would not sell below $2,100/tonne (€1,575/tonne) CIF (cost, insurance, freight) WE (western Europe) for March, up from $1,700-1,800/tonne at the start of the year. One buyer said that he was still getting offers in the $2,000s/tonne for March shipment, but other sources conceded that values would be above $2,100/tonne CIF WE.

An end-user in Spain confirmed buying a 2,000-tonne cargo for late March/early April delivery at $2,110/tonne CIF, but he feared that prices would reach $2,300/tonne before stabilizing.

Asia ACNEuropean manufacturers sought to catch up with prices seen in other regions. In addition, INEOS had cut ACN production at its 300,000 tonne/year plant in Cologne because of problems with upstream propylene availability.

The Swiss firm declared force majeure on propylene supplies from the German site after technical problems forced the No.4 cracker to shut down during the week ending February 17. Initial indications suggested it was likely to be off line for around 21 days.

INEOS was trying to mitigate the propylene shortfall on the spot market, but in the meantime it had to limit ACN production, a company source said.

European spot ACN prices were assessed at $2,080-2,110/tonne CIF WE for the week.

  • With reporting by Amandeep Parmar in London and Wesley Busch in Houston.

Author: Helen Yan and Clay Boswell



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