Asia ACN may extend fall in June, rebound in July

04 June 2012 00:00  [Source: ICB]

Market sources attribute current weakness to shutdowns and reduced operations

Asia prices for acrylonitrile (ACN), in a slump since April, may rebound in July when production ramps up in the downstream acrylic fiber (AF) and acrylonitrile-butadiene-styrene (ABS) sectors.

 

The derivative AF is used to make carpets and winter apparel

Copyright: RexFeatures

ACN offers were at around $1,900/tonne (€1,482/tonne) CFR (cost and freight) northeast (NE) Asia on May 21, but buyers were seeking much lower numbers amid increasingly bearish market sentiment, they said.

In the week ended May 18, ACN spot prices were assessed by ICIS at $1,850-1,900/tonne CFR NE Asia, down by $475/tonne from early April.

The 20% slump was largely attributed to the sharp decline in demand, as AF and ABS makers in the region have either shut their plants or cut production.

ACN prices have also been under pressure from declines in upstream product prices, with US crude below $92/bbl, naphtha around $880/tonne CFR Japan, and feedstock propylene quoted at lower than $1,300/tonne CFR NE (northeast) Asia on May 21.

Traders with stock in hand have been off-loading cargoes at competitive rates on fears that ACN prices will continue falling amid heightened concerns over the eurozone crisis.

"Traders with deep-sea cargoes are prepared to off-load at $1,700/tonne CFR China for June shipments and we are looking to buy at $1,650/tonne CFR China," a Chinese distributor said.

A downstream AF producer in India said that traders were quoting $1,700/tonne CFR India for ACN.

"We are looking at $1,650/tonne CFR India for June shipments," the AF maker said.

However, several ACN makers are considering further cuts to operating rates if margins erode.

"We believe that prices will bottom out at $1,800/tonne CFR NE Asia and will rebound when the derivative AF and ABS makers return to the market to replenish their stocks in the second half of June," a South Korean ACN producer said.

 
ACN demand traditionally peaks in the months of July to September as the derivative AF and ABS makers usually ramp up production so that they can ship out their finished products ahead of the Christmas season.

The derivative AF is used to make winter apparel, carpets and household furnishings, while ABS is the raw material for a wide range of products including toys, household appliances, office equipment and automotive components.

Demand for ACN has significantly weakened over the past months as several downstream AF and ABS plants in China, Taiwan and South Korea are either shut for maintenance or at reduced rates.

Among the AF makers that shut their plants for maintenance are China's Hangzhou Bay Acrylic Fiber, Jilin Qifeng Chemical Fibre, Jilin Jimont Acrylic Fibre and Daqing Petrochemical. ABS makers such as South Korea's Kumho Petrochemical and Taiwan's Chi Mei, on the other hand, have cut their operating rates.

Weak downstream demand prompted a number of ACN producers also to cut production.

Taiwan's China Petrochemical Development Corporation (CPDC) plans to continue running its 240,000 tonne/year ACN plant at a reduced rate in June. "We will continue to run our plant at 85% of capacity in June and will consider shutting down our plant if [ACN] prices drop below $1,900/tonne as our margins will fall into negative territory," said a company source.

Japan's Asahi Kasei was running its 200,000 tonne/year ACN plant at Mizushima at 80% as of May 21. Meanwhile, PTT Asahi Chemical's 200,000 tonne/year ACN plant in Map Ta Phut, Thailand, has been shut for a month now. The plant is undergoing quality checks before the company restarts the plant, said a market source.


By: Helen Yan
+65 6780 4359



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