China acetic acid slumps 15%; restocking may halt further falls

Source: ICIS News

2018/11/09

SINGAPORE (ICIS)--China’s domestic acetic acid prices have slumped over a period of more than two weeks, which may prompt buyers to start picking up spot cargoes and consequently halt any further decline in values.

Overall demand, however,  typically goes into a seasonal lull toward the end of the year while production is expected to stay robust amid good margins.

On 8 November, spot prices in east China averaged yuan (CNY) 4,500/tonne |($647/tonne), down by more than 15% from 22 October, according to ICIS data.

Plunging prices have kept most buyers on the sidelines while producers’ inventories have built up.

Weak upstream crude prices on concerns about consumption amid a global economic slowdown have also been weighing down on the acetic acid market.

End-users in China are mostly using up their acetic acid supply under contracts, which would eventually whittle down.

This would necessitate their return to the spot market and provide support to prices in the near term, even though late October to November is the traditional off-peak demand season for acetic acid.

Downstream markets have also been weak, with some purified terepthalic acid (PTA) producers running their plants at reduced rates because of poor margins, while other plants are undergoing turnarounds.

PTA consumes more than 120,000 tonnes a month of acetic acid.

Current reduced production and the ongoing plant turnarounds will shave the sector’s acetic acid consumption by at least 10,000 tonnes in November, market sources said.

In the ethyl acetate market, prices in east China have also been falling, dragged down by slumping feedstock prices with no demand support.

Production of other derivatives such as vinyl acetate monomer (VAM), acetic anhydride and chloracetic acid has also been low in view of poor margins.

In spite of the weak demand, acetic acid production is strong in China and is due to increase next week, when Jiangsu Sopo’s 1.2 m tonne/year capacity restarts after a planned maintenance.

Domestic producers are running their plants at high rates as they continue to enjoy good margins despite recent sharp falls in prices.

Production margins have declined by half but remained above CNY1,000/tonne, after reducing the estimated total cost of around CNY3,000/tonne.

Nonetheless, acetic acid production may be affected by China’s anti-pollution measures, which are usually put in place during the winter season starting November.

China is a major exporter of acetic acid, but recent deals were scant because of a wide gap in bids and offers.

Export volumes to India may be less than 10,000 tonnes in November, compared with the normal monthly volume of above 20,000 tonnes.

India accounts for more than 60% of China’s acetic acid exports, but most players are currently out of the market because of Diwali, or the Hindu Festival of Lights holiday.

Focus article by Anna Xiang

($1 = CNY6.95)

ICN