Asia acetic acid market may get lift from China restocking

Helen Lee

07-Oct-2015

Focus article by Helen Lee

Asia acetic acid market may get lift from China restockingSINGAPORE (ICIS)–Asia’s acetic acid prices may get a lift from restocking activities, when players in the key China market return after a week-long absence amid reduced production, industry sources said.

On 2 October, main discussions in the region were at the high-$300/tonne CFR (cost and freight) levels, with sporadic deals concluded before the Chinese markets closed on 1 October. Prices fell by $5-10/tonne from the previous week, according to ICIS data.

Acetic acid prices have been falling since mid-August following the devaluation of the Chinese yuan, and the slump in crude futures and commodities values, on concerns over the general weakness in Asian economies, including China’s.

China is on its Golden Week holiday from 1-7 October to celebrate its National Day.

A substantial reduction in China’s acetic acid output in late September caused by plant outages in Jiangsu, Shanxi, and Anhui provinces, coupled with the anticipated demand recovery after China’s week-long holidays should arrest the downslide in prices, market sources said.

The average operating rates at acetic acid plants in China decreased by twelve percentage points to 70% during the week ended 2 October.

“Downstream demand is weak now, but it is hard to say for October as the construction sector is improving and demand for ethyl acetate and other derivatives such as polyvinyl alcohol should recover,” a major producer said.

“So, we are more optimistic than [in] September,” the producer said.

Any upward pressure on prices from restocking activities, however, will likely be tempered as suppliers in China are currently saddled with high inventory amid weak domestic demand, market sources said.

On 25 September, a major producer in China hiked its prices by yuan (CNY) 100/tonne  ($16/tonne) in a bid to recover eroded margins. But the ex-tank prices in the key Jiangsu and Zhejiang markets during the week ended 2 October declined CNY30-50/tonne to CNY 2,050-2,350/tonne ex-tank, ICIS data showed.

“There is no obvious impact from the price hike because all other producers have high inventories. The recovery in prices would demand on suppliers’ inventory and offtakes during the holidays,” a trader said.

On the exports front, suppliers maintained their offers last week at $310/tonne FOB (free on board) China for cargoes loading in the second half of October, but the $10-20/tonne buy-sell spread hampered discussions, with no deals concluded.

Buyers were seeking lower prices, citing weak downstream market and the depreciation of the currencies of importing countries against the US dollar.

($1 = CNY6.36)

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

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