OUTLOOK ’13: Asia's acetic acid prices hinge on curbing of oversupply

04 January 2013 03:00  [Source: ICIS news]

By Helen Lee

Textiles are among the downstream sectors of acetic acid.SINGAPORE (ICIS)--Asia’s acetic spot prices may be bolstered in early 2013 by plant operating rate cuts whereas further price increase drivers are expected to arise mainly from unplanned plant outages as the market is fundamentally oversupplied, according to industry sources.

Some producers may adjust plant operating rates in January in a bid to bolster prices in the near term.

“The price decline may stabilise in January as acetic acid producers may cut operating rates to safeguard margins,” a China-based derivative solvent producer said, adding that solvents demand in 2013 is likely to be normal.

“We may adjust operating rates in January because the local market is weak as suppliers are liquidating high inventories ahead of the upcoming Chinese New Year long break,” a major eastern China-based state-owned acetic acid producer said.

The producer has been operating its plant at a relatively high 90% capacity in November and December in keeping with production quota requirements.

“We hope to raise acetic acid prices even if demand is weak,” a northeast Asia based producer said, on account that feedstock methanol supply will be tight in 2013. The producer has been operating its plant at 60-70% capacity, mainly for captive usage.

Spot prices last hit six-to-seven month highs of $520-540/tonne (€400-416/tonne) cost and freight (CFR) NE Asia/SE Asia and $490-510/tonne FOB China in early May 2012, driven by tight supply amid a spate of plant shutdowns in southeast Asia, Taiwan, China and the Middle East coupled with firming methanol feedstock values during the quarter.

Shipment difficulties for Iranian material to India since mid March amid Western sanctions further heightened supply concerns in India and prompted traders and buyers to snap up spot molecules for May arrival cargoes at $555-575/tonne CFR South Asia, levels last seen in October 2011.

Meanwhile, the tough Asia market conditions prompted Celanese to idle its Singapore-based plant at the end of the first quarter. 

However, protractedly weak real demand and easing supply in China following the completion of heavy plant turnaround season coupled with a lull in buying in India subsequently prompted Chinese exporters to revise down offers to $490/tonne FOB China by mid May, leading to a $5-20/tonne decline in prices across Asia. 

Buying sentiment across Asia thereafter turned increasingly bearish as supply reverts back to oversupply conditions which resulted in spot prices across Asia declining to the sub-$460/tonne CFR levels by late December.

“The demand in December is slightly softer than November in PTA and Esters segments because of typical seasonality. Demand from vinyl acetate monomer (VAM) and acetic anhydride segments remained stable,” a global producer said, “with most acetic acid producers back to normal production levels, the supply situation in December is slightly longer relative to November.”

“If all acetic acid plants maintain operating rates at 60-70% capacity, then prices may decline,” a key eastern China based producer said, “methanol feedstock costs are decreasing but acetic acid is still in oversupply and downstream markets are still weak so buyers see no need to stock up.”

Some buyers anticipate the price direction to hinge on the upstream crude and cost direction rather than demand.

“Acetic acid prices in China were mainly supported by new PTA capacities but other regions experienced no big change,” a PTA producer said, adding that PTA makers in Taiwan may cut operating rates to 50-60% capacity in early 2013 from above 60% in December 2012.

"The market is not in a good condition because of the oversupply of acetic acid,” a purchaser for south Asia and southeast Asia said, “there is no spread so PTA makers may run their plants at lower ratios next year. Acetic acid and methanol spread in 2013 may remain the same as in 2012 unless there is a force majeure situation in the acetic acid market.”

“Acetic acid prices may decrease based on the current supply demand imbalance,” a south Korea based PTA producer said, “we have no margins based on the current PTA to PX spread, therefore, to minimise loss, we may reduce our PTA plant operating rates but adjusting operating rates is not efficient as this is a structural problem.”

“2013 is unlikely to be good because of the lack of buyer confidence and new growth factors,” a China-based trader said, “unless certain acetic acid plants shut down for six months.”

“There will still be an oversupply in 2013 and everybody is losing money,” said a key buyer in southeast Asia, “demand should be stable as the new PTA plants are not running high and if acetic acid suppliers in Taiwan and Japan don’t control the supply then prices will remain depressed because Chinese producers can afford to lose more.”

“We sustained heavy losses in the first half of 2012 but we adopted strict price discipline in the second half of 2012. But there should be a rationalisation of uncompetitive acetic acid plants going forward,” a China-based major producer said.

($1 = €0.77)


By: Helen Lee
+65 6780 4359



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