24 May 2013 09:14 [Source: ICB]
Acrylonitrile (ACN) is used mainly as a monomer or comonomer in the production of synthetic fibres, plastics and elastomers. Its largest end-use is in the manufacture of acrylic fibres, which are used in clothing. Acrylic fibres also have uses in home furnishings.
Another important outlet for ACN is the acrylonitrile-butadiene-styrene (ABS) market, which is primarily used in plastics for the automotive and home-building sectors.
Demand is soft worldwide, mainly because of weakness in the automotive sector - one of the primary markets for ACN. New car sales in Europe are down by about 10% for the second year, and growth in Asia has slowed to single digits. The only bright spot is the US, where the automotive market remains strong, with sales of an estimated 15.5m units per year. Both US ACN producers and auto manufacturers reported one of the best first quarters for several years.
ACN buyers and sellers are also enjoying increased demand from a slightly stronger US housing market. The National Association of Home Builders said US single-family housing starts will reach 672,000 units by the end of this year, and climb to nearly 860,000 new one-family build-outs in 2014.
Because of reduced demand for ACN around the globe, producers in Asia are sending cheap ACN - as well as ABS - to the US. When European producers complete their annual turnarounds in late spring, many market participants expect that they will also start exporting ACN to the US.
US acrylonitrile production fell by more than 13% in the first quarter of 2013, compared with the same period a year ago, according to data released by the American Fuel and Petrochemical Manufacturers. US production this year was 604m lbs (273,973 tonnes), compared with 697m lbs a year ago.
With demand weak, especially in the acrylic fibre market, producers and buyers are always looking for new markets and applications to boost demand. The ACN industry is focused on carbon fibre - the high-cost, space-age material used to make the monocoques for Formula One race cars. ACN producers and automakers would like to see carbon fibre used in more affordable, mass-market cars - primarily because it takes about five pounds of ACN to make one pound of carbon fibre.
Automakers like it because it is just as strong as steel, but about one-quarter of the weight, which would improve fuel efficiency.
However, there are several barriers to this happening. The first is cost - carbon fibre is priced at about $15/lb, while steel costs about 50 cents/lb. Also, carbon fibre takes too long to make, making it impractical for automotive production lines that rely on just-in-time parts delivery systems. Despite these cost- and time-prohibitive factors, the ACN market remains very much focused on carbon fibre.
Over the past 12 months, the US domestic contract price has risen from an average of 90.76 cents/lb to a high of 117.79 cents/lb in February 2013. Over the past two months, the contract price for ACN has fallen to 101.91 cents/lb due to falling feedstock costs for ammonia and propylene, as well as reduced demand from the tyre and acrylic fibre markets.
The dominant route for the manufacture of ACN is the one-step propylene ammoxidation process, replacing the original acetylene-based technology. New technology based on propane ammoxidation is being developed by a number of ACN producers, with claims of a 30% production cost advantage compared to the propylene route.
At the end of the first quarter of 2013, ACN producers remain concerned that the current spot range is below cost, while buyers and traders said a lack of demand in Europe and Asia has brought the market to a near standstill. One source said there is plenty of capacity available in the US, even with Ascend Performance Materials on a scheduled turnaround, but there is no demand.
Many sources continue to be pessimistic about a global economy that many thought was starting to turn a corner at the start of the year, but which actually remains fundamentally weak.
Producers, including those in the acrylic fibre business, remain concerned about consumer confidence, and many do not expect demand to pick up before July or August.
Several market sources said they do not see the acrylic fibre market picking up significantly before the second half of 2013.
They are also concerned about Montefibre Hispania - the Spanish unit of Italy-based Montefibre SpA, which filed for insolvency protection in April. They said Montefibre's troubles are symbolic of an ACN market with too much capacity and not enough demand.
Market participants also continue to watch the cotton markets. According to forecasts from the US Department of Agriculture and other government agencies, the cotton crop is expected to be down this year.
Many ACN producers are hoping that cotton prices rise to the point that fabric producers start blending in acrylic fibre to maintain margins.
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