China acetic acid may rebound on demand recovery, lower supply in Q2

SINGAPORE (ICIS)–China’s domestic acetic acid prices may regain upward momentum during the second quarter of 2018 on the back of an expected recovery of downstream demand and reduced supply as a result of turnaround schedules.

Spot prices of acetic acid have been softening since mid-March following around two weeks of upward movement, largely due to slow recovery of downstream consumption as well as regional imbalances.

Prices in east and south China have been impacted by lower-priced materials from the north where producers had to cut offers to shed inventories.

Downstream demand in north China was dampened by environmental inspections that lasted for most of March.

At the close of trade on 27 March, acetic acid prices in east China stood at Chinese yuan (CNY) 4,675/tonne ex-tank, down by 3.6% from 12 March, according to ICIS data.

Looking into the second quarter, domestic spot availability is expected to drop along with a slew of unit turnaround schedules.

The scheduled turnarounds will cause an estimated 150,000 tonnes of output loss in the second quarter.

On the demand front, traders and end-users must tap the acetic acid market sooner or later as their feedstock inventories are already below comfortable levels, industry sources said.

Domestic purified terephthalic acid (PTA) producers are likely to keep their run rate stable at around 75% in the near future, despite narrowed margin space at the moment.

Around 21% of acetic acid consumption in China are used in PTA production.

Demand from another major downstream vinyl acetate (VAM), which accounts for about 20% of acetic acid consumption, is expected to increase, especially after a 450,000 tonne/year VAM unit wraps up maintenance in May.

However, demand recovery at some downstream sectors, including chloroacetic acid, remains uncertain with increasingly stringent environmental requirements going forward.

Feedstock cost-sensitive ethyl acetate producers, meanwhile, said that they would not replenish their inventories until acetic acid prices retreat further, in view of weakened downstream buying momentum.

Export trades are expecting an every-two-month peak during late April-early May, lending some support to domestic market, according to exporters. But monthly export volume may retreat from the March level, when European and Indian users tapped the Chinese market to fill the supply gap from the US and Singapore amid output disruptions.

China’s acetic acid exports may reach 90,000 tonnes in March, as against the monthly average of 38,000 tonnes in 2017.

That said, the country’s continuing clampdown on risky shadow lending activities and resulting tightened mortgage lending could lead to underselling or a drop in buying interest from time to time.

Top image: (Photo by imageBROKER/REX/Shutterstock)

Focus article by Anna Xiang

ICN