OUTLOOK ’18: Asia’s etac at 6 year high; feedstock to support prices

28 December 2017 02:27 Source:ICIS News

SINGAPORE (ICIS)--Asia spot etac prices hit levels last seen in October 2011 and are expected to likely stay stable to firm next year on higher feedstock prices, though slowdown of business activity is expected during the Lunar New Year holidays in February.

In the week ended 22 December, etac prices reached an average of $1,045/tonne FOB (free on board) China, a $5/tonne increase from the previous week, which saw a hefty $50/tonne increase.

The recent hike represented a 57.7% increase since July 2017

The price increase was driven by firm feedstock acetic acid and ethanol prices and a relatively low inventory.

“It is inevitable the downstream plant operation will slow down before the Lunar New Year and buyers will not need to keep too much stock,” said an etac producer.

However, any downside is likely limited, as cost pressure was still high.

“Etac producers might also reduce operation rates in order to keep supply and demand balance,” said a northeast Asian importer.

Feedstock acetic acetic spot FOB (free on board) China prices have risen 69.9% from July 2017 on persistent tight supply, due to a series of turnarounds in Asia, and then followed by significant volumes being exported to the West due to a US acetic acid plant explosion in October.

It is unlikely that the acetic acid supply gap in Asia would be filled soon as some Chinese plants have gone on short-term turnarounds during winter.

Co-feedstock ethanol prices were also at high levels after previously rising on tight supply and costlier raw materials corn and cassava.

A Chinese government’s initiative to use ethanol in gasoline on a nationwide scale by 2020 has also boosted sentiments and outlook of ethanol.

The biofuel, also known the E10, contains 10% ethanol.

Although etac uses hydrous ethanol, versus the anhydrous ethanol used in biofuel, market players said hydrous ethanol maker could switch to produce anhydrous ethanol and have lower output for hydrous ethanol.

With etac prices at high levels, market players were taking a cautious approach.

“To maintain margins producers have no choice but to increase prices,” said an etac producer.

“Prices now are already at high levels but maybe they will go even higher, everybody is taking a cautious approach and dare not offer too low prices,” added the producer.

Etac makers cautioned against rising feedstock costs.

“We try and maintain our plant operation rate at 100% in December if upstream costs are not unreasonably high but if we cannot absorb the cost, upstream prices will eventually soften as well,” said an etac producer.

With stricter environmental protection measures in China, it was uncertain to what extent etac and upstream plants output would be affected in the near term during winter, and any further tightening of supply might result in further price increase.

In the week of 18 December, a south China etac producer has been ordered to reduce its operation rate to 50% for a week following an environmental inspection.

In terms of etac supply, Jiangmen Handsome Chemical Development would be expanding its Taixing plant’s capacity by another 500,000 tonnes/year by end of 2018, with a majority output likely for etac and butyl acetate and other products are mixed butyl acetate, butyl acrylate, and normal propyl acetate.

The Taixing plant currently has a capacity of 400,000 tonnes/year, of which etac’s output is at 200,000 tonnes/year, butyl acetate at 150,000 tonnes/year and normal propyl acetate at 50,000 tonnes/year.

Jiangmen Handsome is also slated to relocate its butac/etac swing plant from Jiangmen, Guangdong.

A company source said the plant, which has a 300,000 -350,000 tonnes/year etac output would operate as per normal in 2018 and they would await the authority’s direction for the relocation plan beyond 2018.

China is a major producer and exporter of etac in Asia.

Meanwhile, Celanese's 100,000 tonnes/year etac/butac swing plant in Jurong Island, Singapore, would be going on a turnaround in the second week to the fourth week of January 2018.

Southeast Asian supply would likely further tighten in January and February. Some buyers have already turned to Chinese materials amidst a supply shortage.

Outlook article by Li Li Chng

By Li Li Chng