FocusEthanol, ethylene costs to push Sept Europe etac prices up

31 August 2012 18:02  [Source: ICIS news]

By Cuckoo James and Trisha Huang

LONDON (ICIS)--European ethyl acetate (etac) spot prices are expected to remain on an upward trajectory in September because of a relatively rare coincidence of rising feedstock ethanol costs in Asia and ethylene contract price hikes in Europe, industry sources said on Friday.

Stiff competition between local and importing producers for market share had ensured a relatively comfortable position for buyers up until the end of July, but rising feedstock costs both at home and abroad have seen a shift in this dynamic, with both local and importing producers mostly pushing for higher prices.

The same cost dynamic had pushed up etac prices in August, despite a quiet summer holiday period in Europe.

Etac prices  moved up at a faster pace in August - up by 5-6% - than during any other month this year. The August price movement was also the sharpest in a relatively stable etac market, with a 4-5% price decline from June to July coming second.

A major northwest Europe producer utilises ethylene to produce etac, while most importing producers in Brazil, China and India - main sources of European imports - utilise ethanol instead. Ethylene or ethanol is used along with feedstock acetic acid.

In Europe, the September ethylene contract price has settled up by €125/tonne from August to €1,300/tonne ($1,625/tonne). Following the settlement, a European etac producer said it will target an increase of €50-60/tonne in September. Etac was trading at €930-960/tonne (FD) northwest Europe (NWE) in late August.

Producer Celanese has announced a €60/tonne hike in etac offers into Europe for September.

Meanwhile, importers based in Asia are facing their share of price hikes and tightness in feedstock ethanol.

A source at China's Jiangsu Sopo has said the company is planning to keep its 500,000 tonne/year etac plant running at around 60% capacity in the near term because of limited supply of feedstocks ethanol and acetic acid. The availability of ethanol in China has been tight since July, it added.

In India, below-average rainfall during this year’s monsoon has partly caused a hike in sugar and therefore ethanol prices. Lower distillery operating rates during the annual monsoon season have contributed to curb the supply of ethanol.

However, the ethanol supply tightness may not ease substantially with crushing and production resuming in October/November, because the likelihood of a poor harvest has prompted ethanol suppliers to limit their sales volumes, an Indian producer said. India is the world’s second-largest producer of sugar cane.

A source at India’s Somaiya Group said the company might reduce the operating rate at its two etac plants in Maharashtra if supply of feedstock ethanol continues to be tight.

It has been difficult to procure sufficient ethanol to run its etac plants, and Somaiya will make a decision to adjust its output level in the coming weeks, should ethanol availability remain limited, the source added.

The company’s 30,000 tonne/year unit at Mahad and 100,000 tonne/year plant at Sakarwadi are running at full rates currently, the source said. An earlier planned maintenance at the Indian producer in July had seen its regular exports to Europe cut by 60% for June and July shipments as it catered to its domestic buyers.

Other etac manufacturers in India include Jubilant Life Sciences, Laxmi Organic Industries and Dhampur Alco-Chem. Many of the producers said that they expect to see a further increase in the cost of ethanol in September, following a 10-15% hike this month. Domestic ethanol prices in India rose to Indian rupees (Rs) 33-34/litre in August, from Rs29-30/litre in July, the producers said.

In addition to the feedstock ethanol tightness and price hikes, etac imports to Europe have dwindled because of flat European prices and the weak euro to US dollar exchange rate.

Etac prices have been mostly stable in 2012 compared with previous years, despite steep price rises and falls in feedstock ethylene. Prices were unchanged at one point for three months - from March to May - at €950-980/tonne.

Along with the stiff competition, a mostly stable acetic acid spot market and underlying slow demand for etac from the major downstream industrial coatings sector have contributed to the relative stability in the etac market this year.

($1 = €0.80; Rs55.63)

By: Cuckoo James
+44 (0) 208 652 3214

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