China’s acrylic acid, esters prices rising on tight supply

09 November 2012 11:34  [Source: ICB]

Domestic prices of acrylic acid (AA) and acrylate esters in China are expected to continue their uptrend in the near term as a result of tight supply, according to market players.

The uptrend in domestic prices is driving import spot prices up in the Asia Pacific region as well, market players added. AA and acrylate ester prices have been on the rise in Asia following the end-September outage at Japan's Nippon Sokubai's Himeji facilities because of an explosion at the plant.

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Prices are climbing across Asia amid supply tightness

The company's Himeji production facilities cater to about 18% of the annual 1.8m tonnes of global super absorbent polymers (SAP) demand and 10% of the 4m tonnes/year world AA demand.

Prices on a domestic DEL (delivered) basis before the week-long holiday in China for the week ended 26 September were at yuan (CNY) 11,800-12,000/tonne ($1,885-1,917/tonne) for glacial acrylic acid (GAA), CNY14,700-14,800/tonne for butyl acrylate (butyl-A), CNY12,700-12,800/tonne for ethyl acrylate (ethyl-A), CNY11,400-11,600/tonne for methyl acrylate (methyl-A) and CNY15,800-16,100/tonne for 2-ethylhexanol acrylate (2EH-A), according to ICIS data.

"Until the prices in China stabilise, the increase in prices in the Asia Pacific region will continue," a Chinese distributor said.

REVERSED EXPECTATIONS

Before the week-long holiday, the majority of buyers expected prices to decline on the back of weak demand and thus were waiting to only restock after the holiday, market players said.

"No one expected an explosion, causing prices to surge rapidly because of tight supply," a Chinese trader said.

End-users' inventory levels are low, and they have to restock despite the high prices, he added.

Chinese domestic prices for GAA increased by CNY4,500-4,800/tonne, up by CNY3,300-3,500/tonne for butyl-A, and rose by CNY3,600-3,700/tonne for ethyl-A on 24 October, compared with 26 September, according to ICIS data. In addition, methyl-A prices rose by CNY4,900-5,000/tonne, while 2EH-A prices increased by CNY2,900-3,000/tonne, ICIS data showed.

Cargoes for October were limited, with regional producers already evaluating hikes of $100-200/tonne for November, several market players in the Asia Pacific region said.

"It is a sellers' market now; customers are coming to us with bids," a northeast Asia-based producer said.

According to Chinese producers, export enquiries, especially from Japan, increased significantly, further underscoring a tightly supplied market. However, larger profit margins in the domestic market have kept them at bay, they added.

Operating rates at Chinese producers' plants were normal, but cargo availability for sales remains tight, market players said.

Asia Butyl-A"Before the week-long holiday, producers were channelling AA for production of SAP, resulting in a lack of production for acrylate esters," a trader said.

According to market sources, because of the lack of supply, they have no other alternatives but to accept high prices in order to fulfil monthly requirements.

"We have no choice but to accept [these] prices as it is mostly for our monthly requirement needs, and our inventory levels are low," a Chinese buyer said.

Japanese traders are very active in shifting cargoes from China to Japan, a southeast Asia-based trader said.

The majority of buyers said they will face difficulties in passing down the costs to their customers on prevailing weak downstream demand. At the downstream markets front, the tape and adhesives sectors are likely to feel the largest impact, market players said.

SE ASIA PANIC

In the southeast Asia region, the limited availability of cargoes has caused a slight panic in the market, but buyers are not receptive of high prices. "There is an increase in enquiries from the region, but buyers are resisting high prices," a southeast Asia-based supplier said.

Looking globally, acrylates producer BASF has announced plans to increase US prices by 7-8 cents/lb, effective 1 November.

France's Arkema intends to increase the price of its acrylates by 6 cents/lb, effective 1 November.

In addition, Dow Chemical announced its intent to raise domestic November contract price by 7 cents/lb, citing expected volatility in feedstock pricing.

"Prices might soften in the near term, as persistently weak downstream demand might not be able to keep up with such rapid price increases," a trader said.


Author: Lui Lin Samuel Wong



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