FocusAsia’s ACN may rebound as demand picks up amid tight supply

10 July 2012 04:11  [Source: ICIS news]

By Helen Yan

SINGAPORE (ICIS)--Asia’s acrylonitrile (ACN) prices may be near bottom and are likely to rebound soon as demand is picking up at the same time that supply is being restricted from a spate of production cutbacks, industry sources said on Tuesday.

“We expect prices to bottom out in July and rebound in the third quarter as the customers have to re-stock their supplies,” a major ACN producer said.

The downstream acrylonitrile-butadiene-styrene (ABS) makers have increased their operating rates in July to 75-90% of their capacities in China and South Korea, industry sources said.

In the week ended 6 July, spot prices were at $1,600-1,650/tonne (€1,296-1,337/tonne) CFR (cost and freight) northeast Asia, down by about $750/tonne or 30% since the end of March, when prices hit $2,400/tonne CFR NE Asia, according to ICIS.

ACN prices have been declining in the past four months because demand has slumped amid the ongoing eurozone debt crisis, a fragile US economic recovery and slowing economies in China and India.

The uncertain global market outlook has triggered off a spate of production cuts among the downstream acrylic fibre (AF) and ABS makers in Asia – major consumers of ACN - as they slashed their operating rates to 50-70% of their capacities.

Acrylic fibre is used in products such as sweaters, tracksuits, blankets, home furnishings, fabrics and carpets while ABS is used in a wide range of products including household appliances, office equipment, automotive components and toys.

Most of these finished products are made in Asia for export to Europe and the US.

However, Asian ACN producers said that July price levels below $1,900/tonne CFR NE Asia are not workable as their margins have been wiped out by the high feedstock propylene and ammonia costs.

“Our margins are minus, with the feedstock propylene prices going above $1,350/tonne CFR NE Asia and ammonia prices rising to $700/tonne CFR NE Asia,” a major ACN producer said.

Several major ACN producers, including Japan’s Asahi Kasei, South Korea’s Taekwang Industrial, Taiwan’s China Petrochemical Development Corp (CPDC) and China’s Jilin Petrochemical have cut their production output in July to 70-80% of their capacities in view of the poor margins.

“We have reduced our operating rates to around 70% of our total capacity but may consider further cutting the operating rate if the ACN prices continue to fall,” a company source at Asahi Kasei said.

The Japanese major has cut its production output by 10% in July to around 70% of its total capacity at its plants in Japan and South Korea.

The Japanese major has a combined ACN capacity of 450,000 tonnes/year at its plants in Mizushima and Kawasaki in Japan. Its wholly-owned subsidiary, Tongsuh Petrochemical, has a 320,000 tonnes/year plant in Ulsan in South Korea.

($1 = €0.81)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Helen Yan
+65 6780 4359

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly