Price and market trends: Asia etac may extend gains from 20-month high on feedstock cost

06 January 2014 00:00 Source:ICIS Chemical Business

Ethyl acetate (etac) prices in Asia may extend gains after hitting a 20-month high in December on the back of rising feedstock costs, market sources said on 16 December.

The prices of etac sold by China, the regional benchmark, have risen by 12.8% since early September to settle at an average of $970/tonne (€708/tonne) FOB (free on board) China for the week ended 13 December, according to data compiled by ICIS. However, the gains have lagged behind those in the feedstock sector.

Etac prices were last at higher than $970/tonne FOB China in May 2012, according to data compiled by ICIS.

Chinese shipping container Rex Features

Rex Features

China is the largest producer and net exporter of etac

Raw material acetic acid prices in northeast Asia have climbed by 23.4% over the same three-month period to settle at $592.50/tonne CFR (cost & freight) NE (northeast) Asia on 13 December, ICIS data showed.

As at mid-December, acetic acid remained under upward pressure from the hefty gains in methanol prices further upstream.

Methanol prices into China have surged by 35.5% over the same timeframe to settle at $525/tonne CFR China on 13 December, according to ICIS data.

“We have few options but to keep raising our offers each week, as it looks like methanol and acetic acid prices are unlikely to fall in the near term,” said a Chinese etac producer.

Several Chinese etac producers increased their export offers to $930-1,010/tonne FOB China during the week ended 13 December.

The tight supply that has sustained the upward momentum in methanol prices is impacting on acetic acid output. Limited methanol availability has prompted some acetic acid makers in China to reduce their plant operating rates, market sources in China said.

In Singapore, Celanese was heard to have taken its 600,000 tonne/year acetic acid plant off line in November to counter high feedstock methanol costs.

“The prolonged uptrend in China’s etac prices was completely unexpected,” said a northeast Asian importer.

With acetic acid prices still likely to track methanol costs higher, escalating prices of co-feedstock ethanol are putting additional upward pressure on Chinese etac producers to maintain their week-on-week price hike measures.

Ethanol prices in east China have added 9.4% since early October to settle at an average of yuan (CNY) 6,400/tonne ($1,054/tonne) EXW (ex-works) for the week ended 13 December, according to Chemease, an ICIS service in China. Curtailed product availability had spurred the ethanol price hike.

The supply of ethanol in China is likely to stay tight in the near term, after ethanol producers slashed output in recent months to counter weak margins, market sources in China said.

Chinese etac makers’ margins have been compressed for most of the year by a persistent etac supply overhang, a result of the nation’s rapid capacity expansion in recent years. For this reason, etac capacity utilisation has averaged at below 50% so far in 2013, according to data compiled by Chemease.

China etac graph

Etac capacity utilisation in China has averaged about 47.5% until November 2013, with output estimated to reach 1.54m tonnes out of a nameplate capacity of 3.43m tonnes, Chemease data showed.

China is the world’s largest etac producer and net exporter. Shipments from Chinese producers to buyers abroad totalled 414,000 tonnes in 2012, led by sales to Japan, South Korea and Taiwan, the country’s Customs data showed.

As feedstock costs began to rise, the worsening margin erosion spurred Chinese etac makers to implement successive price hike proposals since late September.

However, escalating etac offers from China appeared to have crimped demand in some of China’s key export markets.

“We are importing less in December as we have seen a drop in our local sales volumes and the high cost of importing is hurting our margins,” said the same northeast Asian buyer, who is a regular importer from China.

Meanwhile, importers in South Korea continued to show a strong preference for Indian etac that is exempt from antidumping duty (ADD) and import tariff over Chinese material, which is subject to both duties in South Korea.

South Korea’s import volumes from India so far in 2013 has more than doubled to about 14,000 tonnes, compared with around 6,700 tonnes in 2012. Meanwhile, imports from China have declined to roughly 57,000 tonnes in the first 11 months of 2013, compared with 80,000 tonnes in 2012, according to market sources.

“We stopped importing etac from China a few months ago, because the prices do not give us a reasonable trading margin,” said a South Korean importer.

By Trisha Huang