Weak demand weighs on China acetic acid; methanol lends support

SINGAPORE (ICIS)–Asia’s acetic acid prices are likely to be supported by firm costs of feedstock methanol, despite pressure among Chinese producers to offload inventory via exports, market sources said on Tuesday.

On 10 February, spot acetic acid prices were assessed at $345-355/tonne FOB China, down by an average of $10/tonne from the previous week, according to ICIS data.

But prices may be held up by cost pressures stemming from strong methanol values, with Chinese acetic acid suppliers saying their offers could not go below $350/tonne FOB China.

Spot methanol prices increased $25/tonne week on week to $365/tonne CFR (cost and freight) China on 10 February, according to ICIS data.

Methanol prices in Asia were catching up with strong prices in the European market. In the near term, the market outlook is bullish, market sources said, citing production cuts at Iranian plants.

A northeast Asian buyer that usually buys acetic acid on a contractual basis from its domestic acetic acid producer is monitoring the prices of Chinese material closely.

“We will be interested to import Chinese spot cargo should price go lower, to supplement our regular domestic supply,” said the buyer.

China’s domestic demand for acetic acid is expected to slowly build up in February, after the Lunar New Year celebration, with a pick-up possible in March before turnarounds of major plants start in the second and third quarter, market sources said.

The country was officially on holiday from 27 January to 2 February but the Lunar New Year is traditionally celebrated for 15 days.

Some smaller to mid-sized downstream plants were only expected to re-open this week, and most buyers were also heard to have sufficiently stocked up on supply before the holiday.

The slow take-up in the domestic market, coupled with a build-up of post-holiday acetic acid inventory, prompted Chinese producers to offer more volumes for export at reduced prices. Offers last week were quoted at a minimum of $350/tonne FOB China.

One Chinese supplier had lowered its offers further to $345/tonne FOB China to India, which is a key market for Chinese acetic acid.

Notwithstanding the lower offers last week, no deal for Chinese materials was heard concluded in the south Asian country as some buyers are either well covered by their contract volumes or hold enough stocks to tide them over in the near term.

Focus article by Chng Li Li

Picture (top): Acetic acid is most commonly used in the production of vinyl acetate monomer (VAM), which is a key ingredient in making polymers and resins for adhesives, coatings, paints, films, textiles and other end-products.
(Frank Linke/imageBROKER/REX/Shutterstock)