26 April 2013 10:03 [Source: ICB]
Acetic acid is largely used to manufacture vinyl acetate monomer (VAM), which accounts for one-third of acetic acid consumption. The biggest use for VAM is in the production of base resins for water-based paints, adhesives, paper coatings, films, textile finishes and chewing gum. The second largest derivative for acetic acid is purified terephthalic acid (PTA).
Asia's demand for acetic acid is forecast at GDP levels plus 1-2% annually in the long term.
Given the supply surplus in Asia, acetic acid spot prices tend to be driven by supply shortages and methanol feedstock cost hikes.
This was evident in early May 2012. Spot prices spiked to six/seven month highs on tight supply owing to a spate of acetic acid plant shutdowns in southeast Asia, Taiwan, China and the Middle East, coupled with firming methanol feedstock values.
This was preceded by the idling of global producer Celanese's Singapore-based acetic acid plant at the end of the first quarter of 2012 owing to tough Asia market conditions.
Asian spot prices spiked to a six/seven month high 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.
Shipment difficulties for Iranian material to India since mid-March - amid Western sanctions - also 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.
However, the protracted weak real demand and easing acetic acid supply in China following the completion of the heavy plant turnaround season, coupled with a lull in Indian buying activities in July 2012, subsequently eroded prices to levels last seen one year previously, in July 2011.
Buying sentiment across Asia thereafter turned increasingly bearish as supply reverted to a surplus, which resulted in spot prices across Asia declining to six-week lows by mid-April 2013.
The acetic acid and methanol spread in 2013 in Asia may remain the same as in 2012, according to market observers. Market players anticipate a rationalisation of uncompetitive acetic acid plants going forward.
Of all the major industrial organic chemicals, acetic acid has the most diverse production technology and uses the most varied feedstocks.
Two principle methods involve producing acetic acid from methanol (derived from natural gas), as followed by Celanese and other producers; and from coal, which is the method used by Eastman Chemical. When methanol is used as a feedstock, it is reacted with carbon monoxide.
Methanol carbonylation came about in 1913, when Germany-based BASF discovered that methanol could be carbonylated to acetic acid. Process development continues in methanol carbonylation, which accounts for more than 65% of world capacity.
Eastman uses coal as a feedstock, beginning with high sulphur coal and, through gasification, producing a synthesis gas that is converted into a number of chemicals, including methanol, methyl acetate, acetic acid, and acetic anhydride.
Asia's acetic spot prices were bolstered in early 2013 by cuts in plant operating rates, and further price increase drivers are expected, notably from planned and unplanned plant outages, as the market is fundamentally oversupplied, according to industry sources.
Global producer Celanese wants to reduce the amount of acetic acid it sells on the merchant market to only 25% of production, which will give the company more control over its destiny and increase profitability.
The producer plans to achieve this by increasing internal usage of acetic acid to 75%, from 50%.
Acetic acid demand growth in Asia in 2012-2013 has been driven by new PTA, VAM and solvent acetate capacities in China, southeast Asia and the Middle East.
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