OUTLOOK ’15: Glacial acrylic acid market set for modest SAP growth

By Helena Strathearn

LONDON (ICIS)–The dynamics in the acrylic acid and acrylate esters markets in 2015 are likely to show little change from 2014, but there is expected to be modest growth from the super absorbent polymer (SAP) sector, and a determined push by producers for margin improvement.

Overall, expectations for demand are flat-to-higher by a couple of percentage points for the new year, with consumption level trends likely to largely resemble gross domestic product (GDP) moves.

The potential for a few additional percentage increases in demand for SAP is expected to soak up some of the surplus volume in the oversupplied market.

Global growth of around 5% could demand approximately 250,000 tonnes more monomer in 2015 than was required in 2014.

Acrylic acid is used as a raw material to make SAP for the manufacture of disposable nappies (diapers), surgical pads and other personal care items.

However, despite the possibility for greater global SAP demand, extra capacity is slated to come onstream in China and in Russia in 2015 and looks set to keep the market long.

According to ICIS Plants and Projects data, Russia’s Gazprom Neftekhim Salavat is scheduled to start producing 80,000 tonnes/year of acrylic acid from its facility in Bashkortostan in the fourth quarter.

China will dominate the planned additions with a handful of acrylic acid production sites, while an expansion in South Korea is scheduled for completion in 2015.

As offtake in 2014 veered away from the traditional undulation, players are prepared for some unpredictability in the pattern demand will follow.

Coatings demand in 2014 did not show the usual ebb and flow which is typified by a strong pick up in consumption in April that largely increases in summer, and tapers off around the middle of autumn, when temperatures fall.

Instead, the European market saw early demand activity in February – boosted by unusually mild temperatures – which reached a peak at the end of March and stabilised thereafter until it dipped slightly in August.

September and October offtake lifted somewhat, buoyed by warmer-than-normal weather, allowing the sector its last opportunity for decent demand before it gradually tapered off for the remainder of the year.

Nevertheless, a few prospects seem to be likely. Activity at the start of January is expected to be slow as business is not really expected to return to normal until the second half of the month, following the holiday period.

Acrylate esters are used to make paints, coatings, textiles, adhesives, polishes and plastics.

Restocking will take place, but when coatings demand will pick up is expected to depend – at least to some extent – on economic sentiment and weather conditions, but it should begin in the first quarter in preparation for spring work in the downstream construction sector.

The common theory is that demand will play out much like it did this year.

Something that is expected to continue is the determination by producers to improve margins, on the grounds that they have to. In the short term, the focus will remain on limiting the magnitude of potential price falls in what is presently a buyer’s market.

Market participants point out producers will struggle to continue with the margin levels in the market today.

While there have been a few ascents, acrylate ester spot prices have essentially moved down this year, falling to levels last seen in the first quarter of 2010.

Butyl acrylate (butyl-A) spot prices in Europe began a general downtrend in August 2013, although they saw a slight recovery between March and May this year. Prices had dropped by more than 18% year on year in December.

Global oversupply has exerted downward price pressure on the market, and sellers have been aggressive with their offers to move volumes, and gain market share.

Acrylate plants have run well for the past two to three years. Indeed, one reason that some players say supply has lengthened is the lack of production disruption in 2014, along with increased global capacity, and demand that has failed to show the excitement that most players had hoped.

There is talk that plants could be at risk of failing if low acrylate price levels persist, as producers may delay investments in plant maintenance to cope with narrowed margins.

It’s clear that a lot will depend on growth, and how global macroeconomics will evolve, and it is uncertain what the impact will be not just on the acrylates sector, but the petrochemical sector as a whole.

Players expect a bit more of the same in 2015, and certainly, a pick-up in growth would prove positive for the market, but if this coincides with possible production outages, players said it could turn out to be a changing market.

Acrylate esters include methyl acrylate (methyl-A), ethyl acrylate (ethyl-A), butyl-A and 2-ethylhexyl acrylate (2-EHA).

Europe butyl acrylate FD spot pricing January-December 2014 (€/tonne)

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