OUTLOOK '18: Europe etac to see major capacity expansions, butac supply to normalise

28 December 2017 10:41 Source:ICIS News

LONDON (ICIS)--Pricing for ethyl acetate (etac) was relatively volatile in 2017, softening steadily in times of balanced supply and rising suddenly in times of restricted availability, such as those caused by limited import volumes or times when major European producer INEOS was absent from the spot market.

The biggest question for etac pricing in 2018 will be the impact of the 100,000 tonne/year expansion at INEOS’s UK plant in Hull, on European supply and global trade flows.

A portion of this expansion resulting in 30,000 tonnes/year of additional capacity was finished in 2017, according to sources, and the project is expected to be completed in early 2018.

This will increase domestic production in Europe, which could result in lengthening supply conditions and fewer periods of tighter supply which put upwards pressure on prices.

However, the expansion is understood to require at least one shutdown in order to complete, according to sources. As INEOS is the largest producer of etac in Europe, a shutdown would result in supply tightening significantly unless sufficient stocks of material or volumes from other sources are available.

Levels of activity from importers will also be an important influence on the European market. Etac prices in Asia rose significantly in the second half of 2017 on rising feedstock acetic acid costs, making European prices less attractive to exporters in Asia.

If this situation continues, then import volumes shipped from India and China will remain limited, particularly as any reaction to changing market conditions will be delayed by the 6-8 weeks required to ship additional material to Europe.

Similarly, if tight supply conditions for acetic acid continue in Europe, then rising feedstock costs could also put upwards pressure on European etac prices.

European supply of butyl acetate (butac) was limited for much of 2017 due to a force majeure declared by BASF in October 2016 following an explosion and shutdown of its plant in Ludwigshafen, Germany.

The force majeure was lifted in August 2017, though production continued at reduced rates until December, when it was confirmed that the plant had returned to normal operations.

BASF resuming normal production rates at Ludwigshafen has returned the European butac market to a structurally long situation last seen in September 2016 when the three major European producers (BASF, INEOS and OXEA) were all producing at normal rates.

The main question for pricing in 2018 is whether, despite this lengthening of supply and demand likely to remain stable, prices will remain at levels consistent with 2012-2014 or will fall to the lower levels seen in 2015-2016.

A buyer said that it expected pressure from its downstream customers to reduce prices now that BASF’s FM has ended, which would put pressure on the prices it is paying for butac in order to maintain its margins.

However, upstream factors will also be a strong influence, with higher crude oil and propylene prices opposing the downward pressure caused by the normalised supply situation.

Price movements for key feedstock n-butanol (NBA) will be particularly influential on butac prices. NBA is expected to be stable to soft but supply limitations caused by scheduled shutdowns may limit further price decreases.

By Nick Cleeve