OUTLOOK ’18: Asia adipic acid may fluctuate in narrow range in early ‘18

SINGAPORE (ICIS)–Asia adipic acid (ADA) prices may fluctuate within a narrow range in January 2018 amid a lack of clear market drivers.

In the week ended 20 December, prices for China-origin cargoes were assessed at $1,430-1,450/tonne CFR (cost and freight) NE (northeast) Asia; while those from other origins closed at $1,580-1,600/tonne CFR NE Asia, unchanged from the start of the month, according to ICIS.

There is not much room for ADA prices to go up sharply given rising capacity in China and slowing demand with the approach of the Lunar New Year holidays.

Major Chinese producer Chongqing Huafon Chemical is conducting trial runs at its third new 180,000 tonne/year unit, with commercial operations likely to kick off early next year, a company source said.

“New capacity in China will weigh on the market sentiment, as buyers and end-users are not rushing to build stocks given the ample supply,” a northeast Asian end-user said.

Downstream demand typically softens at the end of the year and this condition may persist in January as some small downstream plants may shut down ahead of the Lunar New Year holiday.

The Lunar New Year, which falls on 16 February 2018, is celebrated in most parts of northeast and southeast Asia. China will be on a week-long holiday on 15-21 February 2018.

ADA prices, however, are firmly supported by strong feedstock cost, as well as balanced-to-short supply.

Prices of feedstock benzene have increased above $900/tonne FOB (free on board) China in the week ended 15 December, from around $800/tonne FOB Korea in early November. And the price may remain firm in January amid healthy demand, market sources said.

“We are considering to raise [ADA] prices if feedstock prices continue to rise, although we are also concerned that further price rise may dampen the buying interest,” a major producer said.

Supply of ADA in China was balanced-to-short amid the ongoing plant shutdowns, coupled with reduced operations at some plants.

Major Chinese producer Shandong Haili has kept its 75,000 tonne/year ADA line in Shandong province off line following a fire at one of its tanks in early December, with no fixed restart date.

Tangshan Zhonghao, meanwhile, is running its 150,000 tonne/year unit in Hebei province at 70% of capacity due to strict environment inspections of factories by the local government.

Henan Shenma was also operating its two plants with a total capacity of 400,000 tonne/year at reduced rates of 90% due to shortage of feedstock natural gas.

“The ADA prices did not change much in the past few weeks and may not move too much in coming weeks amid the holiday sentiment,” a northeast Asian end-user said.

Outlook article by Judith Wang