US acetic acid demand soft in the Americas

02 September 2016 19:43 Source:ICIS News

While oilfield service companies have been oversupplied, demand is strong in downstream VAM for paints and coatings. (Design Pics Inc/REX/Shutterstock)
While oilfield service companies are sitting on too much inventory, demand is stronger in downstream VAM for paints and coatings. (Design Pics Inc/REX/Shutterstock)

Focus article by Tarun Raizada

HOUSTON (ICIS)--The US acetic acid market has dealt with soft demand and long supply this summer, according to sources in the market. This has tended to put pressure on margins, which are currently weak.

Demand has picked up slightly in the oilfield sector, but has overall remained poor. The US rig count rose to 497 for the week ending 2 September, up eight from the previous week. The rig count is up 22% from June, but is down 367 year on year.

Many oilfield service companies have had to sit on hundreds of tonnes of acetic acid inventory because of poor demand from this sector. Acetic acid is used in oil and gas well stimulations to enhance productivity.

Demand in downstream US vinyl acetate monomer (VAM) has been strong in the paints and coatings sector over the summer due to US home sales rising on the back of an improving economy.

VAM production, which is the top consumer of acetic acid in the US, has been challenged by several planned and unplanned turnarounds this year. This includes severe weather during the first weekend in June that caused the shutdown of some VAM units. Flooding from the storms and related power outages affected all of the major VAM producers.

Meanwhile, demand in downstream US purified terephthalic acid (PTA) has remained steady over the summer due to healthy consumption from polyethylene terephthalate (PET) bottled beverages, although it has not been as robust as expected given that summer is typically the peak season.

However, demand from both downstream areas is expected to start slowing down somewhat in the US in September as summer comes to an end.

The annual US Labor Day holiday typically signals the end of strong paints and coatings sales, and sellers are hoping to make the best of what may be their last best hope this year.

Strong demand for paints and coatings near the end of Q3 would allow more pricing power for upstream producers who are seeking September price increases.

Sources are saying that downstream VAM demand in Latin America is currently weak, which is likely to impact US acetic acid exports to the region. Demand in downstream PTA has also been hit by lacklustre PET demand in South America.

In general, the weak economies of Latin America have weighed on downstream demand, particularly in Brazil. Brazil's GDP is expected to shrink by 3.16% this year, according to the nation's central bank.

US acetic acid domestic spot pricing is around $0.22/lb ($485/ton) FOB (free on board) US Gulf Coast, according to a source. Another source commented that it was not getting such a low price for its food grade acetic acid brought in by truck.

US spot export prices have been assessed at $600-625/tonne on an FOB basis.

Major acetic acid producers in the US include Celanese, Eastman Chemical and LyondellBasell.

INSET IMAGE: Demand for acetic acid is stronger in downstream VAM, for paints and coatings. (Gibbins / Keystone USA/REX/Shutterstock)

By Tarun Raizada