China butac may extend gains on strong acetic acid prices

Focus story by Jeffrey Ong

SINGAPORE (ICIS)–Domestic butyl acetate (butac) prices in China are likely to track the rising cost of feedstock acetic acid in the near term, with supply also expected to tighten because of scheduled maintenance at domestic facilities in August, industry sources said on Tuesday.

But most domestic butac buyers in China have been buying on a need-to basis, as they expect prices to correct soon after racking up strong gains in recent weeks.

Offers for bulk butac cargoes from Chinese producers have been increasing since start of the month, taking the cue from acetic acid prices, but no deals were concluded last week, market sources said.

Butac of Chinese origin were heard quoted at $1,250-1,280/tonne FOB (free on board) China last week.

On 25 July, butac was assessed steady week on week at $1,160-1,220/tonne FOB China, according to ICIS.

Domestic prices in China were assessed at yuan (CNY) 8,600-8,700/tonne (1,389-1,405/tonne) ex-works, up CNY200 over the same period, gaining a cumulative CNY700/tonne since the start of the month, according to ICIS China.

Meanwhile, butac producers in China may continue running their plants at reduced capacity amid the high prices and shortage of feedstock acetic acid,  market sources said.

Supply of the feedstock in China has been scarce because of sporadic production issues at some domestic acetic acid facilities, causing prices of the material to increase in recent weeks, market sources said.

Domestic acetic acid prices in China increased by CNY200 week on week to CNY3,900-4,300/tonne ex-works on 25 July.

Wuxi Baichuan has shut down one of its ethyl acetate (etac)/butac swing plant in Jiangsu province and was running its other etac/butac swing plant at about half its capacity.

Another Chinese butac producer had cut operating rates at its butac plant to about 60-70% as it was having difficulties maintaining consistent supply of acetic acid, industry sources said.

In Asia, acetic acid prices were assessed at $590-615/tonne CFR (cost and freight) NE (northeast) Asia, up $5-10/tonne week on week; and at $595-620/tonne CFR SE (southeast) Asia, up $5-10/tonne week on week, on 25 July, according to ICIS.

A regional butac supplier is looking at raising its offers for August-loading cargoes on the back of rising feedstock cost, market sources said.

Buying sentiment for butac has been weak in southeast Asia, partly because of the seasonal rains being experienced by the region and amid a slowdown in some of its economies, market sources said.

Meanwhile, prices of n-butanol – another feedstock for the production of butac – are also on the rise in the domestic Chinese market, gaining about CNY400/tonne week on week to CNY9,300-9,400/tonne on 25 July, according to ICIS China.

Some market sources said that the extent of increase of feedstock prices will be limited, as their current domestic prices in China are close to record high levels.

($1 = CNY6.19)

Additional reporting by Lina Xu

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections