Asia ACN may extend falls on new China supply, deep-sea cargoes

Focus article by Judith Wang

SINGAPORE (ICIS)–Spot acrylonitrile (ACN) prices in Asia may soften further on rising supply in the key China market and a possible influx of competitively-priced deep-sea cargoes, industry sources said on Friday.

On 24 October, ACN prices were assessed at $1,880-1,970/tonne CFR (cost and freight) NE (northeast) Asia, down by $20-30/tonne from previous week, according to ICIS.

Prices have steadily fallen starting 22 August, shedding 6.8% from the highest levels recorded in more than two years, amid declining costs of feedstocl propylene and weak demand.

New capacity starting up in China, which is a net importer of ACN, is expected to weigh on market sentiment, industry sources said.

In Shandong province, a new 130,000 tonne/year ACN plant jointly owned by Sinopec and Wanda Group is expected to start up in mid-November.

“It is a big plant, and everyone is waiting for its start-up. ACN prices in China will likely fall once the new plant … start[s] up smoothly,” a regional trader said.

The country currently has around 1.4m tonne/year of ACN capacity, industry sources said.

“I think prices [of ACN] will go down further by the year-end as deep-sea cargoes usually will come to Asia during this period,” a downstream end-user said.

Asia is expected to see huge volumes of cheaper deep-sea cargoes flowing into the region because of year-end destocking activities in western countries like the US, market sources said.

With expectations of supply continuing to weigh on prices in the near term, most buyers and end-users have adopted a wait-and-see stance on the market.

ACN is used in the production of acrylic fibres, which go into clothing and home furnishings such as carpets, upholstery and cushions.

China’s demand for petrochemicals has been softening amid a slowdown in its economic expansion.

The world’s second-biggest economy posted a slower annual growth of 7.3% in the third quarter, compared with 7.5% in the March quarter.

In the first nine months of 2014, China’s GDP growth averaged 7.4%, lower than its official full-year target of 7.5%.

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