FocusAsia etac may extend fall on feedstock, Lunar New Year

08 January 2014 02:56  [Source: ICIS news]

By Trisha Huang and Allison Shi

MELBOURNE (ICIS)--Ethyl acetate (etac) prices in Asia may extend declines on the back of falling feedstock prices and as some Chinese producers began to clear their inventories in the lead up to the Lunar New year holiday starting on 31 January, market sources said on Wednesday.

The prices of etac offered by China, the regional benchmark, have declined to $950-960/tonne FOB (free on board) China in the week starting 6 January after peaking at $1,020-1,030/tonne FOB China in mid-December, according to data collated by ICIS.

The downturn raw material costs during this period eased the pressure on Chinese etac producers to maintain their week-on-week price hike measures seen throughout November and the firs-half of December.

“There has been some softening in our feedstock prices, so there is less pressure on us to maintain our previous offers,” said an etac producer.

Prompted by easing methanol prices further upstream, the yuan-denominated acetic acid prices in China slumped by 8.2% in the space of two weeks to settle at an average of yuan (CNY) 3,650/tonne ex-tank on 3 January, ICIS data showed.

“Acetic acid prices may have more room to fall, because methanol prices are still showing signs of weakness,” said a separate Chinese etac manufacturer.

Co-feedstock ethanol prices fell by 1.9% over the same timeframe to settle at CNY6,050-6,550/tonne EXW on 3 January, according to data compiled by Chemease, an ICIS service in China.

In tandem with the decreased acetic acid and ethanol costs, the yuan-denominated domestic etac prices in China dropped by 4.1% between late December and early January to settle at CNY6,425/tonne EXW on 3 January, Chemease data showed.

“[Etac] buying activity in the local market has slowed down in response to the domestic price decline,” a third Chinese etac maker said.

“However, the pace of the acetic acid price decline has moderated this week, which is why we are not planning to further reduce our offers for the time being,” the third etac maker added.

Etac prices hit a 20-month high of $970/tonne FOB China in December 2013 on the back of increased feedstock methanol, acetic acid and ethanol prices, ICIS data showed. Etac prices were last at higher than $970/tonne in May 2012, according to data compiled by ICIS. In December, several etac makers increased their offers to $1,020-1,030/tonne FOB China.

However, such offers failed to progress into deals, as growing concerns over a potential downward price correction stemmed regional etac importers’ buying interest.

There were no deals heard done at higher than $990-995/tonne FOB China during the etac price run-up.

In the week starting 6 January, the same producers reduced their offers to $950-960/tonne FOB China.

“Some producers said that they would like to offer material for shipment in the second half of January, as they would like to clear their inventories before the Lunar New Year holiday,” said a regional importer.

However, similar to the slowdown in the domestic Chinese market, emerging signs that etac prices may track feedstock prices lower prompted some regional buyers to temporarily suspend price negotiations.

“We are postponing our discussions for a cargo loading in January,” said a separate regional importer.

China is the world’s largest etac producer and net exporter. Shipments from Chinese producers to buyers abroad totalled 414,000 tonnes in 2012, led by sales to Japan, South Korea and Taiwan, the country’s Customs data showed. The yearly data for 2013 will only be available in late January.

Etac capacity utilisation in China averaged 48% in 2013, according to data compiled by Chemease. Output in 2013 totalled 1.56m tonnes out of a nameplate capacity of 3.43m tonnes, Chemease data showed.

Author: Trisha Huang Allison Shi

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