24 May 2013 09:14 [Source: ICB]
Ethyl acetate (etac) is an active solvent mainly used in industrial lacquers and surface coating resins. It is also used as an extraction solvent in the production of pharmaceuticals and food, and as a carrier solvent for herbicides. Miscellaneous uses include adhesives and solvents.
Market sources generally agree that etac in Asia is in oversupply - a situation that has been exacerbated by capacity expansion in China and India in recent years. The supply overhang has prevented several Asian producers from full capacity utilisation since 2012. In May 2013, Saudi Arabia's Saudi International Petrochemical (Sipchem) started up a 100,000 tonne/year etac/butyl acetate (butac) plant in Al-Jubail - the first etac production facility in the Middle East.
China is the largest etac producer and exporter in the world, with an estimated capacity of 3m tonnes/year as of May 2013. Demand in China has been estimated by market participants at 1m tonnes/year.
Other etac producing countries in Asia include India, Indonesia, Japan, Singapore, South Korea and Taiwan. However, due to the price competitiveness of Chinese material, several of these countries purchase volumes from China to meet local demand.
China's etac exports totalled 414,000 tonnes in 2012, data from China customs showed. Japan, South Korea and Taiwan were China's three largest markets by volume in 2012. In southeast Asia, 2012 etac imports from China by volume were led by Indonesia and Vietnam, Thailand, the Philippines, Malaysia and Singapore.
Other markets for Chinese etac in 2012 included the Middle East and Central and South America. India, with an estimated total etac capacity of 500,000 tonnes/year, is a net exporter.
As a result of the length in supply, average spot etac prices offered by China - the Asian regional benchmark - have been on a moderate downtrend since October 2012.
Prices fell by about 6% to an average of $872.50/tonne FOB China by May 2013, down from $927.50/tonne FOB China in October 2012 - outpacing the decline in the cost of feedstock acetic acid. Meanwhile, supply in China is still rising. In mid-2013, Jiangsu Lianhai will start up a new etac line in Nantong, Jiangsu province, tripling capacity to 300,000 tonnes/year.
The May 2013 start-up of Sipchem's plant in Saudi Arabia, which is likely to curtail Middle Eastern demand for Indian etac, has prompted several Indian etac makers to seek outlets in southeast Asia for excess volumes.
Against this backdrop of a growing supply overhang, etac prices were under additional downward pressure from intensifying competition among Chinese etac makers for shares in the available export markets.
The primary method of etac production in China and India, Asia's two biggest producers, is through the esterification of ethanol with acetic acid in the presence of a catalyst.
The ethanol used in etac production in China and India was until now derived from food crops. While ethanol in China is produced primarily from corn and tapioca, ethanol in India is derived predominantly from sugar molasses.
In mid-2013, US-headquartered Celanese is scheduled to commission its new 275,000 tonne/year ethanol plant in Nanjing, China, which uses its patented TCX technology to turn natural gas or coal into ethanol by using acetic acid as an intermediary.
Market participants said they expect the supply overhang in Asia to continue as capacity expansion is outpacing demand growth for etac.
Asian producers' margins - which have been weak since 2012 - are therefore expected to stay under pressure in coming months.
This ongoing margin squeeze is likely to prompt producers in Asia to keep capacity utilisation reduced. Rising capacity is expected to intensify competition among Chinese etac producers for the available export markets.
Meanwhile, factors including currency weakness and protective tariffs may contribute to weaker demand for Chinese etac in the key markets of Japan and South Korea.
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