Asia adipic acid spikes on feedstock costs; demand still weak

Judith Wang

16-Jul-2014

Focus story by Judith Wang

Asia adipic acid spikes on feedstock costs; demand still weakSINGAPORE (ICIS)–Spot adipic acid prices in Asia have steadily risen since mid-April on the back of rising cost of feedstock, but tepid demand could soon put a lid on surging prices of the material, industry sources said on Wednesday.

For adipic acid of Chinese origin, prices increased to $1,700-1,720/tonne CFR (cost and freight) NE (northeast) Asia in the week ended 9 July, bringing the cumulative gain over the past four months to 9.3%, according to ICIS.

Upstream benzene market saw a near 8% jump in prices, prompting major adipic acid suppliers to hike prices to stave off the resulting margin squeeze, industry sources said.

China is the biggest exporter of adipic acid in Asia.

Major Chinese exporters raised their adipic acid offers by $50/tonne over a two-week period to $1,750-1,780/tonne CFR NE Asia, against buying ideas at $1,700/tonne CFR NE Asia or below.

“Based on our cost, we have to sell at least above $1,750/tonne to break even. Now we keep on losing money,” a Chinese producer said.

Liaoyang Petrochemical, a major adipic acid producer in China, has kept its 140,000 tonne/year adipic acid plant idle from early this week because of negative margins.

Adipic acid cargoes from other countries in Asia, such as South Korea and Japan, also increased, rising by an average of $50/tonne or 2.7%  to $1,850-1,950/tonne CFR NE Asia from early April, according to ICIS.

Producers felt compelled to raise prices to pass on the high feedstock cost to end-users, market sources said.

A major northeast Asian producer increased its offers to $1,950-2,000/tonne CFR NE Asia to recover margins, representing a $120/tonne increase from its June settlement price.

Some end-users posed a strong resistance to these prices, citing continued weakness in demand.

Reduced volumes being exported by Europe and the US into Asia also lent the support to the adipic acid market in this region, sources said.

However, most end-users were reluctant to accept any price increase at this point, as downstream demand in the shoe sole and polyurethane (PU) sectors was relatively sluggish this year, industry sources said.

“I don’t think prices will continue to rise if they are not supported by downstream demand,” an end-user in Taiwan said.

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

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