FocusAsia acrylic acid and esters prices to firm on supply concerns

03 October 2012 05:34  [Source: ICIS news]

By Samuel Wong

diapersSINGAPORE (ICIS)--Asia’s acrylic acid and acrylate esters spot prices are likely to trend upwards following an abrupt shutdown of Japan’s Nippon Shokubai’s Himeji facility and on the back of continued increase in Chinese domestic prices, market sources said on Wednesday.

Nippon Shokubai’s was ordered to shut all its facilities at Himeji after an explosion over there during the weekend.

As a result production at its 460,000 tonne/year acrylic acid and a 320,000 tonne/year unit for super absorbent polymer (SAP) at the site came to an abrupt halt.

Market source say resumption of production will not be soon as investigation into such incidents, especially involving the death of one worker, in Japan takes a long time, maybe up to six months.

“The capacity of the plants is pretty huge, and if the duration of the shutdown is prolonged, it would have a major impact on the market,” a southeast Asia-based trader said.

The company’s Himeji production facilities cater to about 18% of the annual 1.8m tonnes global SAP demand and 10% of the 4m tonnes world’s acrylic acid demand per year.

Moreover, the Japanese market is likely to have the biggest, as the company holds a majority of market share, close to 80%, industry sources said.

“Whilst the Himeji plant is an important facility, it is only one of Nippon Shokubai’s several plants,” P&G said in a statement released on 1 October.

“While we are still assessing the situation, we do not expect significant impact on most of our global business,” it added.

Nippon Shokubai is one of several global SAP suppliers used by P&G and other diaper manufacturers.

Ethyl acrylate (ethyl-A) and methyl acrylate (methyl-A) markets will face the brunt of suspension of production because Nippon Shokubai is a major producer for those markets, the trader said.

“With them out of the [southeast Asia] market, a tighter supply for those markets is expected,” he added.

Nippon Shokubai is currently operating its acrylic acid and esters units in southeast Asia at full capacity in an attempt to support the unexpected shutdown.

“Supply is going to be short in southeast Asia, with a possibility of driving prices up,” a northeast Asia-based trader said.

Spot cargo offers for the market from the southeast Asia-based plants will be limited, he added.

“The market is likely to react sooner or later, especially in the southeast Asia market” said a southeast Asia-based trader.

However, several market participants added that prevailing weak downstream demand might minimise the impact with only a slight adjustment in prices in the coming weeks.

A slowdown in growth rate from major markets like China further dampen sentiments, as seen by a marginal 1% increase in import volumes of acrylate esters in August.

Several market players said that a clearer price direction would only surface after the week-long Chinese holiday, which ends on 7 October.

 “Whether prices will go up, largely relies on how China reacts,” a northeast-Asia based producer said.

There is possibility that Chinese producers will ramp up production to full capacity, and this might likely ease the impending tight supply, market participants added.

In the Chinese domestic market, prices for butyl-A (butyl acrylate) increased by yuan (CNY) 2,000/tonne ($316/tonne), while ethyl-A prices were up by CNY800-900/tonne on a DEL basis on 26 September compared to the prices on 1 August, according to ICIS data.

On a DEL basis, Chinese prices for methyl-A on 26 September increased by CNY800/tonne, and 2EH-A (2-ethylhexyl acrylate) prices were up by CNY1,300-1,500/tonne, compared to the values on 1 August, ICIS data showed.

While import prices into southeast Asia on a CIF (cost, insurance, freight) basis for butyl-A increased by $30/tonne (€23/tonne) on the high end, and ethyl-A prices were higher by $10-20/tonne on 26 September compared to the prices on 1 August, according to ICIS data.

Prices on a CIF SE Asia basis for methyl-A were higher by $20-30/tonne, and prices for 2EH-A increased by $50/tonne on 26 September compared to the values on 1 August, ICIS data showed,

“If Europe is still in a long position, then the impact would be minimal,” a trader said.

The availability of European-origin cargoes would then be sufficient to help support the lack of regional products, he added.

($1 = €0.77 / $1 = CNY6.33)

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

By: Samuel Wong

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