Price and market trends: Asia acrylonitrile prices may have hit bottom

07 December 2012 10:32  [Source: ICB]

Import prices set to rise on higher feedstock propylene prices while ACN producers take down production

Spot acrylonitrile (ACN) prices in Asia may have bottomed out at an average of $1,700/tonne (€1,309/tonne), supported by a tightening of supply as regional producers cut output, industry sources said.

Downward price pressures will also ease as offers for deep-sea cargoes flowing into the region look set to increase, in line with higher contract values for feedstock propylene.

In the week ended 23 November, ACN prices were assessed at $1,650-1,750/tonne CFR (cost and freight) NE (northeast) Asia, unchanged for three weeks following an 11% fall from the average of $1,920/tonne on 14 September, ICIS data shows.

From mid-September to end-October, ACN prices had fallen by more than $200/tonne because of oversupply, with availability of cheaper deep-sea cargoes from Europe and the US, amid weak demand, industry sources said.

This time around, however, the US ACN cargoes are expected to cost buyers more, as contracts for feedstock propylene were concluded at higher prices.

US chemical grade propylene contracts were up by 4 cents/lb to 55.50 cents/lb in November.

"The higher propylene contracts in the US will make the deep-sea cargoes from the US Gulf more expensive and less competitive in Asia," an industry source said.

Meanwhile, some Asian ACN producers have cut production - running their facilities at 80-90% of capacity - to support the prices.

These include China's Jilin Petrochemical, Japan's Asahi Kasei, South Korea's Taekwang Industrial and Taiwan's China Petrochemical Development Corp (CPDC).

"The situation is very serious and unhealthy and the ACN producers in Asia have no choice but to cut back on their production output because our margins are negative," a major Asian producer said.

"Market conditions are very weak and we are losing a lot of money," another producer said.

A major ACN producer has also warned that rationalization of the industry may be on the cards in view of the gloomy market outlook and concerns over a global economic downturn.

"Some smaller ACN plants may have to shut or the larger producers may be forced to shut down some lines," the producer said.

While some industry players are hoping for ACN prices to rebound, the question of when remains.

"It is now approaching the close of the year and buyers are unlikely to restock, so it may be more difficult for the prices to rebound so soon," another source said.

ACN demand from downstream acrylic fibre (AF) and acrylonitrile-butadiene-styrene (ABS) producers has remained weak.

"The derivative AF and ABS markets are weak and several AF and ABS makers are also operating at reduced rates, so it may take time for demand to recover," a third industry source said.

By: Helen Yan
+65 6780 4359

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