26 July 2013 08:44 [Source: ICB]
Easing feedstock acetone prices and a supply overhang could lead to further price falls in the region
Spot methyl isobutyl ketone (MIBK) prices in Asia may track easing feedstock acetone prices and decline further in August, market sources said on 17 July.
Spot MIBK prices into China, the regional benchmark, have slumped by 15% since December 2012 to settle at an average of $1,727.50/tonne (€1,312.90/tonne) CFR (cost and freight) China on 16 July.
Solvents demand from the paints and coatings sector falls during southeast Asia's rainy season
Throughout May and June, MIBK prices were largely stable at an average of $1,725-1,735/tonne CFR China.
However, the 6.4% fall in acetone prices between mid-June and early July, along with the ongoing supply overhang, may exert a strong downward pressure on MIBK prices in August, market sources said.
Spot acetone prices declined to $1,050-1,060/tonne CFR China for the week ended 12 July from $1,120-1,135/tonne CFR China in early June, ICIS data showed.
"MIBK prices may soften further because there's simply too much product being offered by too many sellers," said a Chinese importer.
China imported 23,785 tonnes of MIBK between January and May 2013, up by 96.9% from the same period a year ago, market sources in China said, citing the country's customs data.
Imports from South Korea accounted for 63% of the 3,170 tonnes bought for delivery in May, with the balance largely made up of MIBK supplied from South Africa and Japan, they said.
"MIBK prices may fall again in August, but the price decline should be fairly limited because feedstock costs remain quite high [for MIBK producers in Asia]," said a second Chinese importer.
Reduced demand for locally-produced MIBK in China along with compressed margins have prompted a number of domestic MIBK makers to curtail production since June. Two out of the five MIBK production facilities in China are currently off line.
Zhenjiang LCY General Chemical, a subsidiary of Taiwanese company LCY Chemical, has further postponed the restart of its 24,000 tonne/year MIBK plant in Jiangsu province because of slow demand and weak prices, market sources said.
The producer has deferred its plan to resume MIBK production in early July after bringing forward the unit's scheduled maintenance to early June from late July.
Its parent company LCY Chemical in mid-June reduced the operating rate at its 20,000 tonne/year MIBK plant in Linyuan to about 70% of capacity, from more than 80% previously, in a bid to protect its margins.
For the same reason, China's Taizhou Petrochemical is "unlikely" to restart its 20,000 tonne/year MIBK plant in Jiangsu province in the third quarter, sources close to the company said in early July.
Taizhou Petrochemical's MIBK plant has been off line since December 2012.
Meanwhile, China's Jilin Petrochemical has further postponed the restart of its idled 15,000 tonne/year MIBK line in Jilin, a company source said.
Jilin Petrochemical in May began the process of restarting the line, which has been mostly idle since September 2008.
However, weak margins so far in 2013 have prompted the producer to reconsider its plan to restart the idled line in July.
"The market is unlikely to improve this year," said a Chinese MIBK producer.
There is also a build-up in MIBK inventory in southeast Asia because of high volume of imports in recent months.
In Thailand, demand for MIBK from the automotive and industrial paint and coating sectors may weaken because car sales have slowed down as the government's first car buyer scheme ran out of steam, an importer said.
Moreover, demand for solvents from the downstream paint and coating sector always dips in the rainy season that prevails in parts of southeast Asia from June to August, the importer added.
"[MIBK] demand has not been good this year; the wood coating sector in particular has been quite slow," said a separate southeast Asian buyer.
Furthermore, demand for MIBK has been curtailed by its high cost relative to other substitutable solvents.
Some end-users in the downstream solvents sector are still substituting MIBK with butyl acetate (butac) where possible, because the latter is priced at the low- to mid-$1,200/tonne CFR SE Asia, representing a saving of about $500/tonne, southeast Asian importers said.
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