Asia acetic acid at multi-year lows as supply outstrips demand

Helen Lee

16-Nov-2015

Asia acetic acid at multi-year lows as supply outstrips demandSINGAPORE (ICIS)–Acetic acid spot prices in Asia fell to multi-year lows due to pressure from ample supply in the key China market and limited sales to India, which currently has a high inventory of the material at its ports, industry sources said on Monday.

Price direction in the regional market will hinge on absorption of existing stocks in China, whose economy is slowing down, and on how the crude futures market will behave, they said.

On 13 November, China’s export prices for acetic acid fell by $10/tonne to historical lows of $275-285/tonne FOB (free on board) China, while on a cost-and-freight (CFR) south Asia basis, prices also slipped to record lows of $335-350/tonne, down $5-10/tonne from the previous week, according to ICIS data.

Price discussions last week were generally lower for December-delivery cargoes, but buyers remained hesitant to commit on fear of further price corrections, market sources said.

In northeast and southeast Asia, acetic acid prices fell $5-10/tonne week on week to $340-355/tonne CFR and at $340-350/tonne CFR, respectively, ICIS data showed.

Prices in northeast Asia were at their lowest since March 2009, while those in southeast Asia were the lowest seen since April 2002.

“Since there is no demand at all and domestic price [is] still in a down trend, traders very much want to export so they have to offer lower prices,” a China market observer said.

A couple of major acetic acid producers in China have cut output and shut down plants during the week ended 13 November.

A global producer on 9 November shut its 1.2m tonne/year acetic acid plant in Nanjing, according to sources close to the company. Plant operations were expected to resume this week but the run rates would be kept at a level just enough to meet demand from downstream operations, they said.

Meanwhile, Jiangsu Sopo Chemical cut its daily acetic acid output to 2,700-2,800 tonnes since November, down from the previous 3,000-3,100 tonnes, a source close to the company said. This could not be confirmed with the company.

The plant at Zhenjiang, Jiangsu province has a total capacity of 1.2m tonnes/year. It is expected to run at reduced rates into February 2016, market sources said.

“With the two Nanjing-based acetic acid plants shut, the inventories are declining. But we have to see overall how the inventories are being absorbed in December,” a Chinese trader said.

Domestic acetic acid plants in China were running at an average rate of 68% during the week ended 13 November, down from 78% in the previous week, industry sources said.

In the downstream sectors, purified terephthalic acid (PTA) plants in China were running at an average rate of 60-65%; while vinyl acetate monomer (VAM) plants’ run rates average remained at 53%; and ethyl acetate plants were operating at 50-80% of capacity because of margin erosion.

“We are in [an] oversupply world and it depends on the operation/sales policy of major [acetic acid] exporters,” a northeast Asia-based PTA manufacturer said.

In South Korea, PTA plants were running at an average rate of 70%, which should increase slightly to 75% in December, industry sources said.

Hanwha General Chemical’s three PTA production lines in Ulsan have remained shut since mid-October because of a labour strike. The producer was aiming to restart two of the lines by end-November.

In the downstream solvents acetate plants in northeast Asia, depending on the country, operating rates range from 50-60% to full production since June. One acetic acid buyer intends to keep its contractual off-takes to a minimum for the remainder of the year.

Focus article by Helen Lee

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

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