OUTLOOK ’14: New capacities to weigh on Asia adipic acid market

By Judith Wang

SINGAPORE (ICIS)–New capacities of adipic acid (ADA) will likely weigh on the Asia ADA market in 2014 with producers margins further squeezed amid soft demand for the material, industry sources said.

The latest Asian ADA prices for Chinese origin cargoes were assessed at $1,600-1,620/tonne (€1,184-1,199/tonne) CFR (cost & freight) NE (northeast) Asia in the week ended 18 December, according to ICIS.

The ADA prices for international origin cargoes were assessed at $1,800-1,850/tonne CFR NE Asia in the same period, ICIS data showed.

Major international suppliers and Chinese producers faced squeezed margins or even negative margins as a result of firm feedstock benzene prices, which hovered at above $1,300/tonne FOB Korea in 2013, sources said.

“We are losing money for almost the whole year [2013]. Too many supplies from China, and the competition is very fierce,” a major producer in China said.

“From the second half of this year [2013], the ADA prices were always below $1,700/tonne CFR NE Asia, which is a difficult year for most producers,” the producer added.

However, the situation may worsen further in 2014 amid the increasing new supply in China.

In 2014, around 600,000 tonnes/year of new ADA capacity is expected to come on stream as the start-up of some plants was delayed from 2013, given the weak market fundamentals, industry sources said.

Shandong Hongye’s new 140,000 tonne/year ADA plant was delayed to 2014 from 2013 on the back of weak market conditions, according to a company source.

Other new capacities expected to come online in 2014  include Chongqing Huafeng’s 160,000 tonne/year plant, Hebei Kailuan Energy Chemical’s 150,000 tonne/year plant, Shanxi Yangmei’s 70,000 tonne/year plant and Zhejiang Shuyang’s 80,000 tonne/year plant.

“The supply continues to increase, as a result, the prices will be under pressure next year if demand remains weak,” a trader said.

“2014 is another tough year for us, and I think our margins will be squeezed further on the back of high feedstock cost and increased ADA supply – a double whammy for us,” a second producer said.

On the demand front, buyers and end-users were not willing to build stocks this year given the availability of ADA in the market.

“Looking forward 2014, I don’t think prices will increase much as the supply is very ample, and China is still expanding,” an end-user said.

($1 = €0.74)