Chemical profile: Europe adipic acid

Peter Gerrard

15-May-2015

USES
Adipic acid is a white, crystalline compound and is primarily used in the production of nylon 6,6. It is also used to produce polyurethanes, as a reactant to form plasticizers, lubricant components and polyester polyols. Feedstocks include benzene, cyclohexane (CX) and ammonia.

Key end-use products include automotive textiles, shoes and shoe soles. Other outlets are as a food ingredient in gelatines, desserts and other foods that require acidulation.

 

SUPPLY/DEMAND
The European adipic acid market remains generally rather oversupplied but demand has shown signs of improving in recent months. Sources on the sell side of the market began to report stronger growth in demand in the second half of 2014, but some buyers have also become more positive in the first four months of 2015, as the European economy has apparently become healthier.

As predicted in 2013, Europe has changed from being a source of significant exports to Asia, to being a net importer. Major capacity expansion in Asia, specifically China, must have contributed to this transformation. Since the autumn of 2014, the sizeable trade deficit in adipic acid between the EU and the rest of the world has diminished, with the weakening of the euro against the dollar.

This important shift in the exchange rate has made European product more competitive in the domestic theatre, as well as in foreign markets. In the 12 months to February 2015, the average volume of imports declined by 16.7% compared with the previous 12-month period, although that represented a dip of only about 1,000 tonnes/month. Exports had begun to pick up but the tonnage remained negligible.

It is still too early to say that European consumption of adipic acid is staging a long-term, sustainable recovery.

PRICES
European adipic acid prices continue to be driven principally by feedstock cost movements. While the precursor raw material for adipic acid is CX, it is benzene, further upstream, that tends to determine the outcome of monthly adipic acid contract discussions. The pass-through rate from benzene is approximately 75%. When the market is balanced the delta from one month to the next seldom deviates significantly from that movement.

For much of 2014, adipic acid producers failed to achieve prices that would fully compensate for benzene variations. Thus, while absolute prices varied little from May to November, producers took a hit on their margins. This situation was not immediately ameliorated when values began to fall, with the slump in crude and global feedstock numbers. What did help, however, was the effect of the higher dollar.

By the time feedstock and adipic acid prices began to rise again in the spring of 2015, suppliers were able to recover part of their diminished margins through widening the spread with benzene.

Regarding the near-term outlook, the European adipic acid market remains tight, although production problems believed to have troubled Solvay and BASF are now said to have been resolved and output from their plants resumed. But a shortage of stocks consequent on this means that the market will continue to be tight for at least this month, and a further increment exceeding raw material costs is distinctly on the cards in May, sources say.

TECHNOLOGY
Most production is by the liquid phase nitric acidoxidation of a cyclohexanol-cyclohexanone mixture, also called ketone-alcohol oil. Another route is based on butadiene (BD), using carboalkoxylation.

Exposure to adipic acid irritates the eyes, nose and throat, as well as affecting the respiratory system.

Adipic acid decomposes on heating, producing toxic and corrosive fumes of valeric acid and other substances.

OUTLOOK
Longer term, without Asian or American imports, Europe is regarded as generally balanced between demand and domestic production.

Turkey and Israel are also important for European producers within the wider European arena.

Turkey has grown faster, though it has slower growth rates than previously and should probably no longer be viewed as an emerging country any more.

Long-term growth is expected at a slow and steady rate, according to ICIS Consulting. Between 2012 and 2018, European consumption is forecast to increase from 705,000 tonnes/year to 742,000 tonnes/year.

Most of this growth will be driven by the engineering plastics sector, with nylon 6,6 resins consumption in Europe expected to grow from 208,000 tonnes/year to 226,000 tonnes/year between 2012 and 2018.

Consumption in other downstream markets is expected to remain broadly flat, according to ICIS Consulting.

The rise in engineering plastics demand is being driven by the lightweighting of cars for sustainability, which is leading to the increased replacement of metal parts with plastic alternatives.

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