Price and market trends: Asia etac may extend rebound

13 June 2014 10:43 Source:ICIS Chemical Business

To keep up with soaring feedstock costs, a majority of China etac producers increased export offers to $920-930/tonne

Ethyl acetate (etac) prices in Asia may extend a rebound on the back of rising feedstock prices and lower output in China, market sources said on 6 June.

The prices of etac sold by China, the regional benchmark, were up by 0.8% over the two weeks ended 30 May to settle at an average of $902.50/tonne FOB (free on board) China, according to data compiled by ICIS.

However, etac’s gains continued to lag behind those in the raw material acetic acid sector. Spot acetic acid prices have surged by almost 29% since late March to settle at an average of $560/tonne FOB China for the week ended 30 May, ICIS data showed. The prices of etac have edged 0.3% higher over the same timeframe, according to the data.

“Even at such high prices, there is no product available,” a Chinese etac producer said, referring to the tight acetic acid supply.

Overlapping turnarounds and production issues have contributed to the hike in acetic acid prices.

In a bid to keep up with their soaring feedstock costs, a majority of Chinese etac producers increased their export offers to $920-930/tonne FOB China the week ended 6 June from $910-920/tonne FOB China in the previous week. However, a number of Chinese etac producers are finding it difficult to conclude deals at their latest offers.

“We have to increase our offer in line with feedstock costs, but our higher [etac] offer may have put buyers off,” a second Chinese etac maker said. “Buying activity has been very slow, but we cannot afford to sell at lower than $920/tonne [FOB China] now.”

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 showed. However, price competition among importers in key markets, including South Korea and Taiwan, along with competition among Chinese producers for shares in those markets, has frequently undermined the producers’ feedstock cost-driven price hike measures. “The slowdown in [international] demand may be seasonal; demand tends to fall in the summer months,” a third etac producer said.

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

Jinyimeng Group is capping the overall operating rate at its etac plants in Shandong and Jiangsu provinces at about 70% from about 90% previously.

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. Market sources attributed the unusually long turnaround to weak etac margins.

While seasonality may have contributed to the weak regional demand, the acetic acid price surge has spurred speculation among some buyers that the market may be due for a downward correction, a trader said.

“Some southeast Asian buyers expect acetic acid prices to come down in a few weeks, when supply is expected to return to normal,” the trader said. “As such, they want to delay price negotiations for their next etac purchase.”

By Trisha Huang