US acrylonitrile markets need a ‘first world recovery’ - sources

28 February 2013 19:12  [Source: ICIS news]

HOUSTON (ICIS)--If one thing is clear in the acrylonitrile markets as February comes to a close, it’s this: short of a global economic recovery, things are going to be tough for the next few months.

“What we really need is a first-world recovery,” one market source said Thursday.

Indeed, while many acrylonitrile (ACN) and acrylonitrile butadiene styrene (ABS) producers are complaining about the high price of propylene, the long-term fundamental problem facing these markets is the sluggish economies in the US and Europe.

“The key market for all of us is Asia,” said one market participant that produces both ACN and ABS. “But as long as the economies in the US and Europe are down, the Asian market is going to be very, very cautious. And that caution will be reflected in the purchase of intermediate materials like acrylonitrile and ABS.”

In Europe, GDP for the euro countries contracted by 0.6% in the fourth quarter of 2012 and was down by 0.5% for the full year. Nothing has epitomized the economic doldrums facing Europe more than the auto industry, which saw sales fall to 19-year lows in 2012. Just this week, US auto parts maker Federal Mogul announced that it was closing three of its European plants because of weak demand.

The US economy is struggling, as well. On Thursday, US GDP for fourth quarter 2012 was revised upward from a contraction of 0.1% to a gain of 0.1%. For 2012, the US only grew at a 2.2% rate, up from a 1.8% annual growth rate in 2011.

The one bright spot for ACN and ABS producers has been US auto sales, which grew by 13% year on year in 2012 to 14.5m units, up by 39.4% from an industry low of 10.4m units in 2009. Recent forecasts predicted February US auto sales would be even higher, at a 15.5m unit annual pace.

“Within the Americas, demand into ABS is increasing into March,” said one industry source, noting the strength of the US auto market. “I would say it remains stable to good and improving.”

Acrylonitrile producers are also hoping that home building will continue to show signs of strength. New-home sales in the US jumped 28.9% in January from a year earlier to the highest annual sales pace in four years, according to data released Tuesday by the Commerce Department. Sales of previously owned homes rose by 9.1%.

Unfortunately, auto sales and new home construction are but blips in US and European economies that, overall, remain sluggish. And even if acrylonitrile producers are able to drive down propylene prices in the next few weeks, “limited supply will keep ACN prices up”, a market source said.

So short of a global economic recovery, acrylonitriles look to be tough market for the foreseeable future.

Reporting by Mark Yost

Author: ICIS staff

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