Europe ADA chain 2014 outlook good despite plant outages

By Mark Victory

LONDON (ICIS)–The European adipic acid (ADA) chain outlook for 2014 is positive despite 2013 plant outages due to a lack of profitability, sources said this week.

ADA contract prices have increased by €65-80/tonne ($89-110/tonne) since the beginning of 2013. During the same period, feedstock cyclohexane (CX) contract prices have fallen by €219/tonne. Downstream nylon 6,6 contract prices are at the same level as the beginning of 2013.

This represents a contract price spread recovery against CX across 2013 to date of €284-299/tonne for ADA and  €219/tonne for nylon 6,6, and €134-152/tonne for capro.

Tightening ADA supply because of plant outages has helped overcome weak demand in 2013, allowing producers to recover some margins. The plant outages have primarily been driven by a lack of profitability.

Solvay Polyamide & Intermediates’ shutdown at its 300,000 tonne/year ADA plant in Chalampe, France, is proceeding to schedule, a company source confirmed on Wednesday. The company announced in a press release on 4 October that the shutdown was due to begin.

The plant has been shut down until December for an upgrade to reduce the plant’s carbon emissions by 11,000 tonnes/year and will reduce energy consumption by eight megawatts/year. Once the upgrade is completed, part of the capacity is expected to remain temporarily offline depending on demand.

NF Trading has cancelled the restart of its 30,000 tonne/year ADA plant at Severodonetsk in Ukraine, a company source previously confirmed. The reasons for the cancellation could not be confirmed with the source at the time of writing.

The company had planned to restart the plant – halted in December 2011 – before the end of November this year. It had originally been scheduled to come back on stream in March 2012, but continuously weak margins have led to it remaining offline.

NF Trading suspended production at its second Ukrainian ADA plant, in Rivne, at the beginning of May 2012. There are also no immediate plans for a restart at this second plant.

In late February, BASF suspended a line at its 260,000 tonne/year plant in Ludwigshafen, Germany. Initially this was for maintenance but poor trading conditions have resulted in an extension of the outage until downstream demand improves, a company source previously confirmed. There was no update on the production situation this week.

ADA consumption in 2013 has been broadly stable with 2012, which was at a low level. Nevertheless, the outlook for 2014 is positive.

Several buyers and sellers forecast that ADA consumption growth in 2014 will increase by around 2-3% from 2013. This will be primarily driven by macroeconomic recovery in the shoe-sole and engineering plastics sectors. Adipate plasticizers consumption is also expected to grow, as they continue to replace phthalate plasticizers

“I can just reflect what my customers say, and for example in EPCA [the 47th annual European Petrochemical Association meeting] customers [were] quite optimistic,” an ADA producer said.

Nevertheless, forecasts are provisional, and dependent on wider GDP growth. The majority of ADA end uses are heavily linked to GDP.

“[In] 2014, depending on what the economy is going to do, we hope that we will find growth again, but not more than 2 or 3% plus,” an ADA buyer said.

Coupled with this, several European engineering plastics producers expect demand from the sector to grow in 2014, as they have had increased enquiries for new applications, they said this week.

Engineering plastics is the major end-use market for nylon 6,6 (or polyamide 6,6). Engineering plastics are predominantly used in automotive manufacture, but can also be used for other downstream applications such as electronics.

“Engineering plastics is connected to a lot of end markets. If engineering plastics [demand] picks up, that’s a very good sign for the overall economy. It impacts on adipic [acid chain consumption],” an integrated nylon 6,6 chain producer said.

Recovery in the engineering plastics sector has already boosted ADA chain demand, according to some sources.

“Engineering plastic is doing better. They don’t know for November, but actually October is good. Volumes are there and better than September. For us, I would say, in terms of volumes we’re 7% better and it’s really linked to engineering plastics. Tyre cords is still weak, but I will say there are some positive signs of some small recovery. Airbags is okay,” another integrated producer said.

 ($1 = €0.73)