Asia ADA may rise post-holiday on re-stocking, feedstock gains

SINGAPORE (ICIS)–Asia’s adipic acid (ADA) may firm after the Lunar New Year holidays in the region on the back of re-stocking activities and firmer cost of feedstock benzene.

Chinese Lunar New Year fireworks light up the night sky over the Victoria Harbour in Hong Kong. (Photo by Alex Hofford/EPA-EFE/REX/Shutterstock)

 – Current discussions remain thin

 – Suppliers target higher offers post-holiday

 – Slower-than-expected pick-up in demand likely

Discussions this week have been thin amid the week-long holiday in the markets of China, Taiwan and South Korea.

In the week ended 30 January, spot prices of ADA cargoes from China were assessed at $1,100-1,150/tonne CFR (cost & freight) NE (northeast) Asia, while those of other origins stood at $1,320-1,400/tonne CFR NE Asia, ICIS data showed.

The Lunar New Year, which was on 5 February 2019, is celebrated in most parts of southeast and northeast Asia.

China is on holiday for a full week up to 10 February.

Major regional ADA suppliers are targeting higher prices after the holiday, citing low inventories and higher cost pressure following spikes in benzene prices.

In China, inventories have dwindled as a number of downstream end-users actively purchased cargoes in early to mid-January, when they expected prices to hit bottom.

Spot prices for China-origin ADA cargoes on 9 January fell to their lowest in more than two years at $1,050/tonne CFR NE Asia, which was not seen since 19 October 2016, according to ICIS data.

“We have no sales pressure on low stocks and we believe prices will rise further after the holiday as buyers will come back to re-stock cargoes amid the peak demand season in March and April,” a major Asian producer said.

March and April are usually the peak season for the downstream polyurethane (PU) industry, in which ADA is widely used.

On the feedstock front, benzene prices in Asia at midday stood at $599.50/tonne FOB (free on board) Korea, up by $24/tonne from end-January, according to ICIS.

Higher feedstock cost will prompt sellers to hike the prices to recover margins.

“In the past few years, ADA prices always increase after the Lunar New Year,” a market player said.

However, gains may be limited as demand may not recover immediately after the holiday.

Some small downstream converters in China will not resume operation until after the Lantern Festival on 19 February.

“Some workers will go back to factories after Lantern Festival, which means the demand will eventually improve [only] from late February,” a downstream user said.

Focus article by Judith Wang