China ACN spike to continue as domestic, import supply tightens

08 September 2017 04:02 Source:ICIS News

container ship in China 8 September

SINGAPORE (ICIS)--Domestic acrylonitrile (ACN) prices in China may continue their uptrend due to tightened supply caused by shutdowns of local facilities, as well as hurricane-related disruptions to plant operations in the US.

Prices in east China were assessed on 6 September at yuan (CNY) 13,300-13,600/tonne ex-tank, surging by a total of CNY2,800/tonne or 26% from late July, according to ICIS data.

Domestic supply has tightened in the second half of July, with the shutdown of Qilu Petrochemical’s two ACN units with a combined capacity of 80,000 tonnes/year amid the Chinese government’s ongoing environmental inspections of local chemical factories, market sources said.

Its 30,000 tonne/year unit was shut on 15 July, while its bigger 50,000 tonne/year plant was taken off line three days later, with no definite restart dates.

Market sources said the plants are unlikely to resume operations in the near term.

More plant shutdowns occurred in August, including the 120,000 tonne/year ACN unit of Jilin Petrochemical. The company’s other plant with a 106,000 tonne/year capacity has remained off line since 12 June.

Market participants said these shutdowns were also caused by environmental issues at the plants.

Production losses from the combined shutdowns of Qilu Petrochemical and Jilin Petrochemical plant are estimated at around 20,000 tonnes per month.

In September, Shanghai SECCO shut one of its four ACN units for a week-long turnaround, shaving production by 9,000 tonnes.

On the import front, supply is also expected to take a hit following massive shutdowns of refinery and petrochemical capacities in the US Gulf Coast - including INEOS’ 545,000 tonne/year ACN unit and Ascend’s 590,000 tonne/year ACN unit - in the aftermath of Hurricane Harvey.

China is a net importer of ACN, with 28% of its 2016 total import volume for the material sourced from the US.

The shutdowns in the US are expected to affect negotiations in the spot and contract markets, and exert an upward pressure on China’s domestic market this month.

Delivery of September ACN contract cargoes from the US was not affected by the hurricane, but the delivery of October cargoes might be delayed, a major downstream producer said.

However, other buyers said downstream acrylic fibre (AF) and acrylamide (AM) sectors were bearish, with some looking at cutting output in response to high inventories of their own products and to increasing feedstock cost, although demand typically strengthens in September and October.

AF makers have been incurring production losses since August following the spike in ACN prices, while demand continued to be sluggish.

China ACN-AF spread 8 September

If AF plants in China cut their average rate to 50% – the worst-case scenario – from 70% currently, demand for raw material ACN is expected to decline by 30,000 tonnes.

ACN suppliers, however, are taking heart from increased production in the acrylonitrile butadiene styrene (ABS) sector, the largest downstream sector of ACN.

Operating rates at Chinese ABS plants have been ramped up to an average of 94% in August and September from around 80% in July. This translated to increased monthly ACN consumption of 8,000-9,000 tonnes, according to ICIS data.

ACN downstream pie 8 September

Focus article by Ivy Ruan

($1 = CNY6.49)

Pictured above: A container ship at the port of Qingdao in east China's Shandong province. (Source: Sipa Asia/REX/Shutterstock)
By Ivy Ruan