OUTLOOK ’18: China local acetic acid market seen balanced-to-tight

SINGAPORE (ICIS)–China’s domestic acetic acid market fundamentals in 2018 are expected to be balanced-to-tight, which would support prices, with the expected increase in supply just sufficient to meet current demand.

Production capacity in the country is expected to inch up around 1% this year, with the scheduled start-up of Tianjin Bohai Chemical Industry Group’s 100,000-tonne/year plant.

The plant is expected to begin production in the late second quarter or the third quarter of 2018, a company source said.

In April, Sinopec Great Wall Energy and Chemical plans to shut its 300,000 tonne/year acetic acid unit in Ningxiang for around a month of turnaround, but this is not expected to affect domestic supply as most of the plant’s output are for captive consumption.

Meanwhile, China’s acetic acid production, particularly from plants in the northern region, could be hit by the government’s measures to control the typical spike in air pollution in the “2+26” cities during the first quarter of 2018.

The “2+26” cities refer to Beijing and Tianjin municipalities, eight cities in Hebei province, four cities in Shanxi province, seven in Shandong and seven in He’nan.

Kingboard Chemical’s 500,000 tonne/year unit in Hebei province and Shandong Hualu-Hengsheng Chemical’s 600,000 tonne/year plant in Shandong province are currently running at half their capacities.

Acetic acid consumption, on the other hand, is forecast to grow at a faster pace of around 5%, with a slew of downstream purified terephthalic acid (PTA) units coming on stream in 2018.

The PTA projects, if running at full capacity, will increase acetic acid consumption by around 250,000 tonnes per year.

Apart from new downstream start-ups, Xianglu Petrochemical resumed operation at two long-idled PTA production lines at Xiamen, Fujian province in early November. The lines have a total capacity of 3m tonnes/year. Meanwhile, Reignwood Petrochemicals restarted two PTA lines in Zhejiang province, each with a capacity of 700,000 tonnes/year during October-November.  These PTA plants have an estimated monthly acetic acid consumption of 10,000 tonnes, when running at full tilt.

Around 21% of acetic acid consumption in China are used in PTA production.

Meanwhile, demand for acetic acid used in ethanol production looks set to rise next year following the country’s announcement in mid-September to roll out the use of ethanol gasoline nationally by 2020.

Some producers are planning to restart their acetic acid-based ethanol units early next year as feedstock cost is likely to stay low.

Domestic prices of acetic acid in China may be weighed down by tepid demand during the first quarter, a traditional lull demand season for the industry.

Moreover, increasing volumes of acetic acid are expected to be shipped overseas next year.

In the first three months of 2018, China could remain a major source of supply to India and Europe to cover the shortfall of US cargoes into these markets.

Eastman Chemical’s and BP’s acetic acid force majeure, which was declared in the aftermath of Hurricane Harvey in September 2017, will remain in place until around January 2018.

In the meantime, nearly 1m tonne/year of acetic acid capacity in India, Saudi Arabia, and Japan, will be taken off line for maintenance during the first half of 2018, causing an estimated production loss of about 60,000 tonnes.

Outlook article by Anna Xiang

ICN