19 April 2013 09:24 [Source: ICB]
Spot butyl acetate (butac) prices in Asia may stop falling on the back of a stable outlook for the cost of feedstock n-butanol (NBA), despite weak regional demand, market sources said on 11 April.
Prices have fallen by 1.9% since early March to settle at an average of $1,300/tonne (€1,001/tonne) FOB (free on board) NE (northeast) Asia for the week ended 4 April, according to data compiled by ICIS.
Low lacquer demand in China contributed to the butac fall
In the key China market, weaker-than-expected demand from the downstream lacquer, coating and solvents sectors contributed to a 7.1% slump in domestic butac prices in the space of one month.
China butac pices plunged to yuan (CNY) 9,100-9,200/tonne ($1,468-1,484/tonne) EXW (ex-works) on 4 April from CNY9,800-9,900 EXW on 1 March, according to Chemease, an ICIS service in China.
In Taiwan, producer Shiny Chemical Industrial, which operates a 60,000 tonne/year normal butac/iso-butac/normal propyl acetate swing plant in Kaohsiung, in late March lowered its export offer by $20/tonne to $1,330/tonne FOB Taiwan.
US acetyls producer Celanese, which operates a 100,000 tonne/year ethyl acetate (etac)/butac swing plant in Singapore, reduced its benchmark Singapore butac ex-tank price for April to $1,330/tonne ex-tank, down by $20/tonne from March.
A separate butac producer in southeast Asia said its plan to roll over its March pricing into April may be a tough sell.
"Demand [for butac] is not that strong, and buyers are holding back because they expect prices to drop further," the butac producer said.
The 4.7% fall in feedstock NBA prices in northeast Asia since late February spurred butac's decline from early March, market sources said. This is despite the 3.4% gain in the cost of co-feedstock acetic acid in northeast Asia over the same period, ICIS data showed.
However, the moderate rebound in the broader petrochemical markets since late March, along with the rebound in propylene prices further upstream, is reinforcing a stable outlook for the prices of NBA, market sources said.
Furthermore, the availability of NBA remains curtailed by plant maintenance in Japan, Malaysia and South Korea, said a trader.
Prices are likely to remain stable in the near term as NBA producers are reluctant to accede to the low buying ideas, the trader added.
"[NBA] buying ideas are currently unworkable, and some producers have opted to suspend price discussions for the time being," the trader said.
The stable feedstock cost outlook has prompted Chinese butac makers to maintain their export offers at $1,280/tonne FOB China since early April, even though an ongoing bid-offer gap hampered liquidity in spot sales.
"Supply of NBA is still quite tight, and we have very limited room to cut [butac] prices further," a Chinese butac producer said.
Chinese butac makers have slashed their export offers by $70-100/tonne since early March after their price hike proposals throughout late February and early March failed to materialise into concrete deals.
The producers' offers were at $1,350-1,380/tonne FOB China late February through to early March.
Buying interest from net butac importing countries in southeast Asia, including Vietnam and Thailand, for Chinese butac offered in early March at around $1,400/tonne CFR SE Asia was non-existent, because product was available from butac producers in Indonesia, Singapore and Malaysia at the low-to-mid-$1,300s/tonne CFR SE Asia level during March, market sources said.
"The [butac] supply overhang has been in place for quite some time," said a southeast Asian butac importer.
"Regional buyers seem to have developed a psychological resistance to butac priced above low-$1,300s/tonne [CFR SE Asia] because there is always product available in the market," the importer added.
Some regional butac importers' bids for April were capped at $1,280-1,300/tonne CFR SE Asia because of slow downstream buying activity in their respective markets, along with strong competition from lower-priced secondary butyl acetate, a butene derivative that is often used to replace butac in low-end applications such as wood coating.
Vietnam's secondary butyl acetate imports in 2012 surged to nearly 15,000 tonnes, an 86% year-on-year increase, according to market sources.
In Thailand, demand is expected to ease in April because of the Songkran festival on 13-15 April, local sources said. Many companies and factories will be shut for about a week for the festive holiday, they said.
Currency fluctuations also crimped butac buying activity in Japan, which purchased close to 10,000 tonnes from China in 2012.
A trader of Chinese butac said its discussion with a Japanese buyer for a cargo previously scheduled for shipment in April has been temporarily put on hold.
It was difficult to proceed with price negotiations for the cargo because Japanese importers are facing strong end-user resistance to their proposed butac price hikes at home, which were prompted by the weaker yen.
The depreciation of the Japanese currency in recent months has rendered dollar-denominated petrochemical imports costlier, necessitating Japanese importers to raise yen-denominated local prices to cover their higher import costs.
"The yen depreciation is becoming a serious issue," the trader said.
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