FocusAsian etac prices to remain stable on feedstock, demand

22 October 2012 05:53  [Source: ICIS news]

By Trisha Huang

MELBOURNE (ICIS) – Spot prices of ethyl acetate (etac) in Asia may remain stable in the near term because of static upstream prices and unchanged regional demand, market sources said on Monday.

Prices of etac offered by China, a regional benchmark, have been largely unchanged for the six weeks ended 19 October at $920-935/tonne (€708-720/tonne) FOB (free on board) China, mimicking the consistency in upstream acetic acid prices over the same period, according to ICIS data.

Acetic acid prices were stable in the six weeks ended 19 October at $420-430/tonne FOB China, ICIS data showed.

The cost of co-feedstock ethanol in China has similarly been consistent since early August, albeit at a historically high level, after unpredictable weather conditions spurred a surge in the prices of agricultural raw materials corn and tapioca since July.

Ethanol has held firm at yuan (CNY) 6,330-6,650/tonne ($1,013-1,064/tonne) in the Jiangsu region since early August, according to Chemease, an ICIS Service in China.

While the gains in ethanol costs since early July had prompted Chinese makers to raise offers for etac cargoes loading in August, September and October, their price hike proposals have had limited success because of a lack of further improvement in etac demand in China’s key export markets.

Rising Indian etac sales to Europe has meanwhile crimped the flow of Chinese etac to the west.

“Even though our margins have been under pressure from high feedstock costs, it has been quite difficult to raise prices in recent months, because our buyers have been resistant to price increases by even $5-10/tonne,” said a Chinese etac maker.

Demand for etac in the downstream ink, paint and adhesive sectors in China’s key export markets, including Japan, South Korea, Taiwan and southeast Asia, has not seen significant increases.

On the buying side, attempts by importers to raise their local selling prices in tandem with their cargo replacement costs have similarly been undermined by substantial end-user resistance. As such, the importers have been resisting Chinese etac maker’ proposed price increases throughout August, September and October.

In South Korea, importers said their margins in September were heavily squeezed by domestic producer Korea Alcohol Industrial’s decision to roll over its August etac pricing of won (W) 1,180/kg ($1.07/kg) ex-works (EXW) into September.

In southeast Asia, a distributor reduced its ex-tank price in Singapore and Malaysia to $1,020/tonne ex-tank this month, in view of poor end-user response to prices at $1,040/tonne ex-tank. 

“There were very few takers at $1,040/tonne ex-tank, because other regional suppliers offered etac at more competitive prices of about $1,000/tonne ex-tank. To move product, we had few options but to cut prices,” said the distributor.

In addition to stable buying ideas in the export markets across Asia, a growing supply overhang has intensified competition among Chinese etac makers for shares in the existing markets and curbed etac’s potential feedstock-led price increase. 

Some importers added that they are unwilling to accept price increases in view of rising supply from China, which accounts for about half of the world’s etac capacity of 4m tonnes/year.

“It’s a classic case of oversupply,” said a southeast Asian importer.

“There is simply too much product available in the market,” the importer said. 

Two new plants with combined etac capacities of half a million tonnes a year were commissioned in late August.

Wuxi Baichuan Chemical Industrial has offered cargoes to buyers abroad after starting up its new 300,000 tonne/year etac/butyl acetate (butac) swing plant at Nantong in Jiangsu province in late August. The plant is producing solely etac.

Shanghai Huayi Goup has doubled its etac capacity with the commissioning of its new 200,000 tonne/year etac plant at Wuwei in Anhui province.

The company operates a second etac plant of the same capacity at Wujing in Shanghai under the company Shanghai Wujing Chemical.        

While demand in the leading export markets is set to grow annually, the demand growth has failed to keep pace with the rapid increase in supply.

Import demand into Japan, the biggest buyer of China’s etac, is expected to strengthen in 2012 year on year.

Based on the latest import data, some traders estimate that etac imports into Japan could reach 140,000-150,000 tonnes this year, compared with 124,000 tonnes in 2011.

Japan’s 2011 etac imports were weakened by the March 2011 earthquake and tsunami.

While China remains the leading supplier of etac to Japan, accounting for just over 80% of the country’s imports so far in 2012, there were also cargoes purchased from South Korea, Singapore, Indonesia as well as South Africa.

Import volume into South Korea, the second-largest buyer of China’s etac, may see a 10-15% year-on-year increase in 2012, said traders. South Korea purchased 69,000 tonnes in 2011, the bulk of which was supplied by China.

($1 = €0.77 /$1 = CNY6.25/ $1 = W1,105.45)

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

By: Trisha Huang

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