Chemical profile: European adipic acid

25 January 2013 10:31  [Source: ICB]

Adipic acid (ADA) is a white, crystalline compound and is primarily used in the production of nylon 6,6. It is also used to produce polyurethanes, as a reactant to form plasticizers, lubricant components and polyester polyols. Feedstocks include benzene, cyclohexane (CX) and ammonia.

Key end-use products include automotive textiles, shoes and shoe soles. Other outlets are as a food ingredient in gelatines, desserts and other foods that require acidulation.

The European polyamide chain is bracing for another tough year in 2013, with margins continuing to be squeezed by high feedstock costs and weak demand.

Consumption is expected to be low because of poor macroeconomic conditions - at least in the first half of the year. Nevertheless, upstream feedstock benzene costs are expected to remain firm because of continued shortages of pyrolisis gasoline (pygas), a key raw material for benzene production.

Margins throughout the polyamide chain have been squeezed in 2012, which has led some producers to mull shutdowns if they do not improve. Several players predicted that end-use fibre demand will be 5-12% weaker in 2013 compared with 2012, and that first-quarter auto demand could be up to 30% below 2012 levels in the first quarter of 2013.

Concerns also remain over the impact of additional polyamide chain capacity in Asia, with players throughout the chain seeing this as a key region for development.

Asia has traditionally been a major importer of European ADA, with the majority used in the high-grade fibre market.

Several sources expect that expanded capacity in China will lead to a reduction of import demand.

This will result in increased supply in Europe as material previously earmarked for the export market is sold domestically.

Amid weak demand in Europe resulting from bearish macroeconomic conditions, which have reduced consumer purchasing power, this could result in consolidation.

European consumption has not increased since the beginning of the year. Managing working capital remains a key strategic priority for the industry and purchases continue on a just-in-time basis.

Some sources are hopeful of an increase in demand in February on forecasts of renewed buying in Asia after the Lunar New Year.

European adipic acid (ADA) margins have been severely squeezed since May 2011 because of poor macreconomic conditions coupled with rising feedstock costs. Between May 2011 and December 2012, ADA contract prices fell by €345-375/tonne. In the same period, the upstream benzene contract price rose by €424/tonne. Squeezed margins have led to speculation of operating rates being reduced and plants idled.

European ADA January contract negotiations are ongoing. Producers are targeting price increases of €100/tonne because of the need to re-establish margins lost in the fourth quarter and to recoup the €69/tonne increase in the January benzene contract price. Buyers are aiming to limit increases to below €50/tonne, arguing that downstream demand will not support price hikes beyond this.

Most production is by the liquid phase nitric acidoxidation of a cyclohexanol-cyclohexanone mixture, also called ketone-alcohol oil. Another route is based on butadiene (BD), using carboalkoxylation.

Exposure to adipic acid irritates the eyes, nose and throat, as well as affecting the respiratory system. Adipic acid decomposes on heating, producing toxic and corrosive fumes of valeric acid and other substances.

Long-term growth is expected at a slow and steady rate, according to ICIS Consulting. Between 2012 and 2018, European consumption is forecast to increase from 705,000 tonnes/year to 742,000 tonne/year.

Most of this growth will be driven by the engineering plastics sector, with nylon 6,6 resins consumption in Europe expected to grow from 208,000 tonnes/year to 226,000 tonnes/year between 2012 and 2018.

Consumption in other downstream markets is expected to remain broadly flat, according to ICIS Consulting.

The rise in engineering plastics demand is being driven by the lightweighting of cars for sustainability, which is leading to the increased replacement of metal parts with plastic alternatives.

By: Mark Victory
+44 208 652 3214

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