HOUSTON (ICIS)--The October explosion at an Eastman Chemical unit in Tennessee caused a big boom heard around the world that continues to reverberate in global acetyl markets as 2018 begins.
The shutdown of Eastman’s coal gasification unit at the producer’s Kingston headquarters complex prompted a near-global scramble for acetic acid to make up for lost supply at the 277,000 tonne/year plant and caused a jump in prices.
The price jump, shown in the five-year the chart below, shows the shot-up in acetic acid export prices after the Eastman explosion that put values at a two-year high and within range of a five-year high.
An Eastman competitor called the outage not just significant in the US but also globally.
US acetic acid export prices rose by 15% from just before the explosion to a month later.
One US producer, Celanese, announced a 4 cent/lb ($88/tonne) increase in early December that if accepted would be another double-digit percentage price boost.
Also announced for Europe, the proposal is said to be one of the sharpest hikes in the recent history of acetic acid. One source said that it proves that acetic acid is in scarce supply in Europe because of the need to divert it to the US to make up for material lost in the Eastman outage.
Spot prices in China have jumped by 11% since the explosion, with an uptrend in Asia continuing unabated to levels last seen in May 2011 because of global supply shortages in the wake of the Eastman explosion.
Since early October, American producers have been fielding calls from potential new customers who were turned down by Eastman, which told them there would be no more spot acetic acid from Kingston for the rest of the year. A supplier said acetic acid was just being sucked out of the system.
“I don’t have enough product,” the supplier said.
Eastman did not have enough product either. An executive told stock analysts that the company was bringing in acetic acid to the site to make silicon hydride, because most of Eastman’s derivative units in Kingston run on that material.
The acetic drain came in a domestic US market that produces around 2.8m tonnes/year but faced the immediate prospect of making do with maybe just 2.7m tonnes, squeezing supply a few percentage points tighter.
The explosion brought a significant cost for Eastman, which said it expects the unit to resume normal operations in early 2018 and has estimated the incident will cost the company around $100m.
An Eastman executive said in a conference call that business interruption insurance should cover much of the cost of the explosion after Eastman meets its $75m deductible. Add to that Eastman's property insurance, which carries a $5m deductible, the executive said.
Eastman chief financial officer Curt Espeland told stock analysts recently that he thinks the cost of the explosion will be totally offset by insurance payments the company will receive in 2018.
“I know it will probably be a net positive insurance recovery over cost,” Espeland said.