Asia etac prices may rebound on firmer feedstocks, output cuts

MELBOURNE (ICIS)–Ethyl acetate (etac) prices in Asia may extend a small rebound on the back of rising feedstock prices and lower output in China, market sources said on Monday.

The prices of etac offered by China, the regional benchmark, were assessed as 0.3% higher week on week to settle at an average of $897.50/tonne FOB (free on board) China for the week ended 23 May.

A majority of Chinese etac producers maintained their export offers at $900/tonne FOB China in the week ended 23 May. A producer increased its offer to a minimum of $930/tonne FOB China because of the hefty gains in raw material prices.

“Acetic acid prices are much too high [relative to etac prices] and supply [of acetic acid] is getting tighter,” said a Chinese etac producer.

In the domestic market, the yuan-denominated prices of etac in east China have risen by 2.1% since the week ended 28 March, lagging behind the 18.3% gain in acetic acid prices over the same timeframe, according to data compiled by ICIS.

Overlapping plant turnarounds and production issues have been behind the acetic acid price increase.

“[Acetic acid] supply is very limited, and prices are still rising,” said a separate Chinese etac manufacturer.  

China, the world’s largest etac producer, exported 421,947 tonnes of etac in 2013, led by sales to Japan, Taiwan and South Korea, the country’s customs data shows.

However, price competition among importers in key markets including South Korea and Taiwan, along with competition among the Chinese producers for shares in those markets, has frequently undermined Chinese etac makers’ feedstock cost-driven price hike measures.

Taiwan was the second-biggest buyers of Chinese etac in 2013, with shipments totalling 63,871 tonnes, according to China’s customs data.

Shipments to South Korea, the third-largest buyer by volume, totalled 59,962 tonnes in 2013, the data shows.

“Our South Korean customers are bidding at below $900/tonne [CFR (cost & freight) Korea] for June cargoes, and we can’t match such bids,” said a third etac producer.

The surge in manufacturing costs, along with the worsening margin squeeze, has prompted at least two Chinese etac producers to reduce their output this month.  

China’s Jinyimeng Group in mid-May slashed its etac output because of the severe margin squeeze.

The producer lowered the overall plant operating rate at its etac plants in Shandong and Jiangsu  provinces to about 50% from around 90% capacity previously. The two plants have a combined etac capacity of 350,000 tonnes/year.

China’s Rizhao Jiahong Biological Technology on 10 May took its 100,000 tonne/year etac plant in Shandong province off line for a month-long maintenance shutdown. However, market sources attributed the unusually long turnaround to weak etac margins.

The extended uptrend in the domestic prices of acetic acid has reversed the downtrend in domestic etac prices in China, paving the way for higher-priced trades in the week ended 23 May.

Domestic etac prices in east China rose for the first time since late April, settling at an average of yuan (CNY) 6,000/tonne ($958/tonne) EXW (ex-works) in the week ended 23 May, data compiled by ICIS China shows.

“Based on the latest acetic acid costs, it is likely that Chinese etac producers will be seeking a price increase for June shipment,” said a trader.

Additional reporting by Allison Shi

($1 = CNY6.26)