S Korea's Samsung BP Chem mulls cuts in Ulsan acetic acid output

22 November 2013 04:57 Source:ICIS News

SINGAPORE (ICIS)--South Korea’s Samsung BP Chemicals plans to reduce production further at its acetic acid plant in Ulsan in the near term because of firmer costs of feedstock methanol, a company official said on Friday.

The plant has a 600,000 tonne/year capacity, according to ICIS.

Samsung BP Chemical may cut the plant’s run rate to 70-85% from 90-95% currently, the source said, adding that the company does not have any spot acetic acid cargoes available.

“Methanol prices will not come down in the coming two months, because the mechanical difficulties at southeast Asia-based methanol plants are not simple short-term issues, but fundamental long term issues,” the source from Samsung BP Chemical said.

“The acetic acid sector, which is only 13% of total methanol demand, is suffering from higher methanol feedstock costs. That's why acetic acid producers are shutting or reducing plant operation rate unless the methanol costs are passed on to the acetic acid market price,” he said.

In northeast Asia, selling indications for regional acetic acid were at $530-550/tonne (€398-413/tonne) CFR NE Asia this week, for cargoes loading in the second half of November and second half December. This followed a $20/tonne increase last week, according to ICIS data.

A global acetic acid producer hiked its prices by a total of $55/tonne in the past two consecutive weeks.

On 15 November, spot acetic acid prices were assessed at $530-540/tonne CFR SE Asia, up by $20-30/tonne from the previous week, according to ICIS.

“Demand is still weak with buyers waiting and seeing because of the year-end lull,” a producer said. 

The difficulty in covering feedstock costs has prompted a global producer to shut its southeast Asia-based plant this week, whereas another regional producer is expected to follow suit.

With methanol values seen to remain propped up by tight supply, several other acetic acid producers may be prompted to reduce production or shut their facilities in the first quarter of 2014, an industry observer said.

Major acetic acid producers in Asia include Celanese, BP, Jiangsu Sopo, Yankuang Cathay Coal Chemicals, Henan ShunDa Chemical and Hebei Yingdu Gasification; Chang Chun Petrochemicals, Gujarat Narmada Valley Fertilizers & Chemicals (GNFC); Saudi Arabia’s International Acetyl Company; and Fanavaran Petrochemical.

($1 = €0.75)

By Helen Lee