China acetic acid gains; supply to tighten on increased exports

SINGAPORE (ICIS)–China’s acetic acid domestic prices may continue to rebound as the effects of output disruptions in the US – in the aftermath of Hurricane Harvey – are rippling through the Chinese market, industry sources said.

Domestic spot availability of acetic acid in China may fall from this month onward as local producers are looking at exporting more volumes than usual, to cover the shortfall of US cargoes into the Indian market, they said.

At the close of trade on 5 September, acetic acid prices in east China stood at Chinese yuan (CNY) 2,900-3,150/tonne ($444-482/tonne) ex-tank, representing an increase of CNY70/tonne at the low end of the assessed price range in end-August, according to ICIS data.

Prices in the domestic market have started to increase this month, after falling by CNY50-120/tonne over a two-week period from mid-August.

Exports currently offer good margins for Chinese producers, and provide them with an alternative sales outlet since domestic demand is expected to be unstable amid the Chinese government’s ongoing stringent environmental inspections of chemical factories.

Chinese exporters will be competing with Middle East producers in selling higher volumes of acetic acid to the Indian market, which is expected to receive fewer cargoes from the US.

Hurricane Harvey had pummeled the US Gulf Coast in late August, resulting in massive shutdowns of refinery and petrochemical capacities, including the acetic acid plants of major producers Celanese and LyondellBasell.

Production loss for acetic acid in the US is estimated to be at least 100,000 tonnes, an industry expert said.

Within China, spot supply of the material will be further limited by expected shutdowns, turnarounds, as well as reduced operating rates at domestic plants.

Shanghai Huayi Group has yet to restart its 700,000 tonne/year acetic acid plant in Wujing following an outage since mid-July; while its 500,000 tonne/year unit at Wuwei, Anhui province will remain off line for maintenance until 10 September, a company source said.

Firmer domestic prices of feedstock methanol have also exerted an upward pressure on the acetic acid market.

On 5 September, methanol prices were assessed at CNY2,850-2,859/tonne ex-tank in east China, up by about 10% from the previous week, ICIS data showed.

Several acetic acid producers were heard to have raised their offers by CNY 200-300/tonne on 1 September, industry sources said.

Some cargo holders that cut their prices in end-August due to a bearish market outlook had called off the adjustment, while buyers noted increased difficulty in getting a good bargain, they said.

However, a few market players argued that rising methanol prices could provide limited support for acetic acid as many acetic acid producers in China have their own feedstock production facilities.

The recent upward movement was a result of speculative trading and further price hike is unlikely in the near term, they said.

Acetic acid inventories were above comfortable levels since a few producers in northern parts of China – such as Shaanxi Yanchang Petroleum and Kingboard Chemical Holdings – have wrapped up maintenance at their plants in mid-August, industry sources said.

Focus article by Anna Xiang

($1 = CNY6.53)

Pictured above: A sports shoe. Acetic acid mainly goes into the production of vinyl acetate monomer (VAM), which is used in soles of sports shoes. (Photographer: John Fisher/CSM/REX/Shutterstock)

ICN