Europe ACN buyers more regionalised in 2022, costs a concern
LONDON (ICIS)–As Europe navigates the ongoing COVID-19 pandemic, the focus on regionalisation has become a trend for a segment of acrylonitrile (ACN) buyers, but increasing costs are a growing concern.
Sources are trying to figure out what this will mean for their businesses and margins.
The soaring freight rates from Asia and supply chain disruptions have led many buyers over the past 18 months to challenge the status quo of business agreements.
While freights have come off their peak seen in December, they are still much higher than pre-pandemic levels.
The likelihood of this focus on regional business being a longer-term strategy is slim for some sources at least, but it could be the trend for a proportion of the market for the first half, and possibly all, of 2022.
Not just high freight rates have hampered movement of product from Asia to Europe, but some reduced output in Asia has too in Q4, some of which was a direct response to the ‘dual control’ policy in China.
The Lunar New Year celebrations in February, the ‘dual control’ policy and the winter Olympics due to be held in Beijing next month all continue to impact the flow of product.
No real improvement is expected on logistic woes until at least H2 this year and some say 2023.
Acrylonitrile-butadiene-styrene (ABS) buyers continue to struggle to secure material in Europe and stocks in the region remain low. There is one example of a backlog of ABS orders and that player is not expecting to see balance before mid-2022.
Sources would still prefer to spread the exposure across the regions, but the lack of ABS imports and more recently acrylamide and acrylic fibre (AF) has seen stronger-than-usual order books of these ACN buyers.
“We see more and more regionalisation – not sure on the timeframe, but it will get worse before it gets better as there are more restrictions on manufacturing in Q1,” one buyer said.
Costs are a rising issue. Europe is currently the highest priced region for feedstock propylene and the ongoing strength in natural gas pricing is adding pressure. This is true not only via ammonia for ACN production, but via production costs for the more energy intensive production processes of ACN, such as AF.
This will reduce the desire to remain regional. As one buyer said, “in the end with pricing being where it is, we will look outside [the region], not this year, but further forward.”
ACN itself remains a net importer of product as can be seen in this trade flow map.
When the pandemic hit in 2020, there was talk that regionalisation would be a trend for various petrochemicals, but it was only as 2021 progressed that it gained more traction for the buyers of ACN.
High freights and lack of vessel space are likely to be prohibitive for some months to come, but if costs are to climb further some question whether this would reduce run rates at production sites for both the sellers and buyers of ACN.
ACN is used in the production of synthetic fibres for clothing and home furnishings, engineering plastics and elastomers.
Focus story by Jane Massingham
Interactive graphs by Yashas Mudumbai, trade flow data by Laura Succi