OUTLOOK '18: US ACN expected to balance out in new year

Source: ICIS News


HOUSTON (ICIS)--The US acrylonitrile (ACN) market is expected to recover and balance out in 2018, following major production hurdles encountered in 2017.

The majority of sources expect demand to strengthen in 2018, given strong market fundamentals in end-use sectors such as acrylamide and an expanding market for seasonally strong acrylonitrile butadiene styrene (ABS) and acrylic fibres (AF).

Demand will further be impacted by a crackdown by the Chinese government on environmental regulations that has shuttered production in parts of the country. Although new capacity has either come online or is expected to start in the new year, these regulations have the potential to sporadically dictate supply needs into the new year.

That said, ACN supplies are expected to remain severely depleted into 2018 as US producers recover from lost inventories associated with the aftermath of Hurricane Harvey in the US Gulf region from late August 2017, following market-wide turnarounds in the second quarter.

Producers that were not impacted by Harvey have not had the inventory levels to meet market demand, encouraging them to hold onto inventories for more economically advantageous market conditions expected in Q1 2018.

As such, producers are expected to hold onto inventories in order to secure moderate inventory levels for what is anticipated to be a strong demand season in first quarter.

However, supplies are unlikely to recover to levels seen in early 2017, with two major producers expected to enter turnaround in the second and third quarters.

With that, ACN prices are expected level out and eventually soften as supply levels improve.

Moreover, feedstock propylene supplies are expected to lengthen amid new capacity expected to begin in late December 2017, as Enterprise Product Partnets starts up a 750,000 tonne/year propane dehydrogenation (PDH) unit in Mont Belvieu Texas.

Therefore, ACN prices are expected to soften into 2018 as the market finds balance on improved feedstock availability and improved supply levels amid steady to stronger demand.

Supply levels had begun to recover in the third quarter until Hurricane Harvey prompted the two largest producers of ACN in the US, INEOS Nitriles and Ascend Performance Materials, to declare force majeure. A number of crackers in the US Gulf region were also impacted, putting upward pressure on main feedstock propylene through the end of 2017.

Supplies have been slow to recover since then. Producers impacted by Harvey have faced difficulty in recovering inventories as downstream demand in multiple end-use markets such as ABS and AF remained strong for most of the third and fourth quarters until experiencing seasonal downturn toward the end of 2017.

One producer lifted its force majeure on ACN in November 2017 after facing issues with its ammonia supply, while another one remains in force majeure as of early December 2017. Although all three producers are operating at strong levels, current supply levels have not been able to meet demand, with only one deal confirmed to have been done out of the US in the fourth quarter.

The Chinese government crackdown on environmental regulation further rocked ACN supplies in the second half of 2017, puting further pressure on ACN markets in the US and elsewhere.

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Major ACN producers in the US include Ascend Performance Materials, Cornerstone Chemical and INEOS Nitriles.