27 July 2012 00:00 [Source: ICB]
Demand remains weak, but buyer inventories are low, providing hope for sellers
European acrylonitrile (ACN) spot prices have no further room to decrease and will recover in August, the majority of players expect.
Forecasts of recovery follow severe price falls throughout the second quarter, resulting from poor economic conditions and weak export markets. Across the quarter, ACN spot prices fell by $750-900/tonne (€615-738/tonne).
A RARE INCREASE
During the second week of July, however, ACN spot price ideas increased by $100/tonne at the bottom end of the range, to $1,500-1,600/tonne CIF (cost, insurance and freight) WE (west Europe). The development marks the first increase at the low end of the range since March 16.
"Spot prices moved to $1,500/tonne on the back of restocking and speculation on expectations that [prices are] bottoming out. Underlying, though, it's still weak," an ACN trader noted.
This is particularly true in the downstream fiber market, where operating rates are as low as 50%, according to market estimates. Fiber demand in June 2012 was estimated at 10-20% below July 2011 levels by market players.
Demand is not expected to increase until September, after the traditional August lull in fiber production. Peak production typically extends from September to April.
Traditional August end-user outages are expected to be protracted this year because of weak demand and low margins.
In acrylonitrile-butadiene-styrene (ABS) - another key end-use market for ACN - demand is weakening in anticipation of the summer holiday in August.
Although underlying demand in Europe remains the same, ACN consumption has increased owing to restocking and speculation.
"The bottom is reached, but fundamentals are unchanged. It's moving on speculation," a buyer said.
Low-priced material from eastern Europe, which had been placing downward pressure on western Europe, has disappeared from the market, said a producer. "Asia is starting to enquire again," he added.
Buying interest in Asia is increasing as a result of local tightness. Several Asian ACN producers reduced operating rates to 70-80% in July because of poor margins. Tight supply in Asia pushed spot prices in the region $50/tonne higher at the top end, to $1,600-1,700/tonne CFR (cost and freight) NE (Northeast) Asia, during the week ending July 13.
Russian and deep-sea cargoes from the US Gulf had been weakening Asian ACN prices, an Asian trader said.
"With all the Russian cargoes sold out, and no other spot cargo available for July arrival, it looks like ACN prices may be on the rebound," he said.
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