08 March 2013 09:29 [Source: ICB]
Spot butyl acetate (butac) prices in Asia may extend recent gains on the back of strengthening cost of feedstock n-butanol (NBA) and reduced butac output in China and Taiwan in February, market sources said.
Spot butac prices in northeast Asia have risen by 3.1% since mid-December 2012 to settle at an average of $1,315/tonne (€999/tonne) FOB (free on board) NE (northeast) Asia, lagging behind the gains in NBA costs, which have added 7.4% to reach an average of $1,555/tonne CFR (cost and freight) NE Asia over the same period, according to data compiled by ICIS.
Paints and coatings drive butac demand
NBA PRICES TO RISE
Furthermore, NBA prices are likely to trend upwards in the near term on firm feedstock propylene prices further upstream, according to market sources. The availability of NBA cargoes remains tight because of several scheduled plant maintenance.
Over the longer term, however, butac producers' outlook for NBA prices in 2014 is bearish because of NBA capacity expansion in China.
"China has been an NBA importer until now, but the market dynamics are likely to change with the start-up of new oxo-alcohols plants in China in the second half of 2013," a northeast Asian NBA producer said.
As China's NBA import reliance is reduced by its capacity expansion and increasing self-sufficiency, NBA prices may come under downward pressure in the longer term, the producer added.
To keep up with the feedstock cost increase since December, Chinese butac makers have boosted their offers to $1,350-1,400/tonne FOB China for the week ended 22 February, an increase of $100-150/tonne since late December. The producers added that they may need to raise their offers again in the near term to cover an expected further hike in NBA costs.
"Our view is that NBA prices are unlikely to fall before April," said a Chinese butac producer, adding that it has been difficult to secure spot supplies because of limited cargo availability.
While it remains to be seen whether buyers in Japan and southeast Asia, the key markets for China's butac exports, will accept the producers' latest round of price hikes, few butac producers in China and Taiwan were saddled with inventories when the market re-opened following the Lunar New Year holiday, as they took measures to curtail their output over the festive holiday.
China's Dragon Sky Chemical is running its 50,000 tonne/year butac plant in Shanghai at 60% of capacity after restarting the unit on 18 February. The plant was taken off line on 5 February to stem excess output over the festive holiday period.
Fellow Chinese producer Wuxi Baichuan Chemical Industrial is running its 200,000 tonne/year ethyl acetate (etac)/butac swing plant at Jiangyin in Jiangsu province at about 60% of capacity, after shutting the plant for maintenance during the Lunar New Year holiday on 9-15 February.
In Taiwan, Shiny Chemical Industrial restarted its 60,000 tonne/year normal butac/iso-butac/normal propyl acetate swing plant in Kaohsiung on 19 February, after taking the unit off line on 7 February to avert an inventory build-up over the holiday period. The Lunar New Year holiday in Taiwan fell on 9-17 February in 2013.
In southeast Asia, regional butac makers are proposing price increases of $50-70/tonne for March from $1,290-1,320/tonne CFR SE Asia in February, said regional buyers. Southeast Asian butac makers' proposed price increases were prompted by feedstock cost concerns along with the mounting butac selling indications from China throughout January and February.
Even though Asian producers' butac offers have been boosted by higher production costs, "the sustainability of butac producers' intended price hikes will ultimately depend on downstream demand", said a northeast Asian butac maker.
The same northeast Asian producer said that it has abandoned an earlier plan to raise its post-holiday offer by $20-30/tonne because of clear buyers' resistance to any price hike proposals.
The producer added that a further price increase may dent its butac export volumes, which declined in the past year.
As such, the producer kept its bulk butac offer at $1,350/tonne FOB NE Asia, unchanged from before the festive holiday.
THAILAND DEMAND WEAK
Meanwhile, butac demand in Thailand, a net importing country, is showing few signs of improving.
A butac importer in Thailand said demand from the downstream paint and coating sectors has been dented by the country's increased labour cost, which has reduced the competitiveness of Thailand's manufacturing sector.
Solvent demand was additionally capped by a stronger local currency, which has hurt the country's exports of finished goods including furniture, footwear and automotive parts, the Thai importer added.
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