26 December 2012 02:47 [Source: ICIS news]
By Judith Wang
SINGAPORE (ICIS)--Asia’s adipic acid (ADA) margins are expected to rebound in 2013 as regional producers plan to hike their selling ideas or reduce supply on the back of persistently firm feedstock benzene prices, industry sources said.
ADA prices were assessed at $1,850-1,900/tonne (€1,406-1,444/tonne) CFR (cost & freight) NE (northeast) Asia on 19 December, while benzene prices were at $1,441-1,480/tonne FOB Korea in the week ended 14 December, according to ICIS data.
The spread between ADA and benzene prices narrowed to around $400/tonne in the second half of this year because of firming feedstock prices, sources said, adding that the breakeven level is at least $500/tonne.
“We are losing money for most of the year, as benzene prices keep going up, which eroded our margins completely,” a major producer said. “But our ADA prices were unable to rise accordingly, given the soft downstream consumption.”
As a result, many Chinese producers had to cut their plants’ operating rates to bolster ADA prices, industry sources said.
Looking ahead to 2013, the supply of benzene in Asia will likely remain tight, with prices keeping firm despite the capacity expansion of several downstream plants in China, sources added.
“I think we have no choice, but to raise [ADA] prices next year if benzene prices continue to rise. This could at least help us to improve [our] margins,” another producer said.
“If the downstream users are unable to accept [our firmer offers], we will have to reduce the supply [of ADA],” the producer said. “We don’t want to lose money again next year.”
Many ADA plants in Asia are currently operating at 50-70% capacity because of their higher production costs, producers said.
However, some end-users have started building up their stocks on expectations that prices will increase further. End-users said they want to keep their inventory at a moderate level.
Market participants agreed that ADA prices will likely remain on an uptrend after China’s Lunar New Year holiday on 9-15 February, especially as the seasonal peak in demand begins in March.
However, some market players are worried that the newly expanded plant capacities in China will likely weigh on ADA prices next year.
China’s Shandong Hongye Chemical Industrial Group and Hebei Kailuan Energy Chemical are expected to start up a 140,000 tonne/year and 150,000 tonne/year ADA plants in 2013 respectively.
“One thing for sure is that we are not allowed to lose money anymore. We have to pass on our cost to downstream users in 2013,” a Chinese producer said.
ADA is primarily used in the production of nylon 6,6 (or polyamide 6,6) as well as in the manufacturing of polyurethane, which is used in the soles of shoes and in polyester resins.
($1 = €0.76)
Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections
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