Asia etac at 11-month high, may extend gains on China price run-up

Focus article by Trisha Huang

MELBOURNE (ICIS)–The prices of ethyl acetate (etac) in Asia may extend a strong rally as the China domestic market run-up continues, market participants said on Thursday.

The prices were assessed at an average of $670/tonne FOB (free on board) China for the week ended 14 October, the highest close since late November 2015, according to data compiled by ICIS.

The prices began a rebound in mid-September from a record low of $610/tonne FOB China.

Offers from China, Asia’s biggest etac producer and exporter, prevailed at $710-720/tonne FOB China in the week.

The steep ascent in China’s US dollar-denominated etac export prices has been fuelled by the feedstock cost-driven domestic etac market rally, according to several market participants.

The yuan-denominated prices of raw material acetic acid in east China have amassed 23.8% of gains since late August to close at an average of yuan (CNY) 2,475/tonne EXW (ex-works) on 14 October, ICIS data showed.

The tightness in the availability of acetic acid and methanol further upstream is likely to prevail in the near-term, a Chinese trader said.

Increased winter heating demand in northern China, along with the Chinese government’s drive to curb overcapacity in polluting industries including coal and steel, is expected to constrain the supply of coal, the dominant feedstock for methanol in China, the trader added.

Against a backdrop of limited raw material availability, the domestic etac price rally is drawing additional strength from resurgent domestic demand.

“Buyers’ psychology is to buy in a rising market. The higher the prices, the better the demand,” a Chinese etac producer said.

Domestic etac transactions broke through the CNY5,000/tonne EXW barrier in the preceding week, a level last seen in July 2015, ICIS data showed.

Etac is trading at around CNY5,050/tonne EXW in east China, the same Chinese trader said.

Chinese producers are showing little interest to match regional buyers’ bids at lower prices because of the strong performance in the domestic market sector.

“Our domestic sales volumes have tripled or even quadrupled in recent weeks,” a separate Chinese etac maker said.

Leaner etac supply, stemming from planned and unscheduled plant outages, has contributed to the domestic etac price run-up.

The ongoing tightness in China’s acetic acid availability is further constraining etac supply.

Chinese producer Guangxi Xintiande is in the process of raising its etac output to 100% capacity, after topping up its acetic acid supply with a new delivery.

The producer had been running its plant at 40% capacity since a restart on 1 October because of its low acetic acid inventory level.

Compatriot Jiangsu Sopo has restored its etac output to 50% capacity, following decreased production level in the second half of September.

However, the major producer is continuing to grapple with low etac inventories, following an unplanned shutdown in September and a five-week maintenance between late June and early August.

 “We are not in a position to offers cargoes for exports because of our low [etac] inventories,” a company source at Jiangsu Sopo said.

China exported 289,590 tonnes of etac between January and August 2016, down 2.1% from the first eight months of 2015, according to the country’s Customs data.

China, with 3.45m tonnes/year of capacity, is Asia’s largest producer of etac.