LONDON (ICIS)--The European acetic acid market is likely to be to continue to be dominated in the first months of 2018 by the fall-out from the outage at Eastman’s plant in Kingsport, Tennessee, caused by an explosion and fire.
This outage has resulted in a global disruption of the flow of acetic acid, as producers have hastened to adjust to the significant loss of output.
While the plant may be in operation again at the beginning of the year (still uncertain at the time of writing in December 2017), a resumption of full capacity production may take longer to fulfil and yet more time be required for the producer to replenish normal inventory levels. Normalisation of the world market should not be a protracted process but should take a little longer to be accomplished.
This development aside, participants in the European market do not foresee major events that could bring about a significant change from this year.
Some feel that it will again become balanced to long, with an adjustment to prices to take them back in line with where they were before the crises of autumn 2017. Others consider that the market will not be subject to deflationary conditions.
So far as can be judged, prices of feedstock methanol will be firm, and high input costs and increasingly stringent environmental controls in Asia expected to mitigate imports from that continent.
These factors can also be seen against a generally benign economic background. Acetic acid is expected to move more or less in line with GDP growth.
There are some minor features in the market that might affect supply and demand. At some point in the year, INEOS will have a turnaround on ethyl acetate (etac) production at a 70,000 tonne/year unit, which could lengthen the acetic acid market a little for the corresponding period.
On the other hand, a company is pioneering its wood acetylation technology that should require more acetic anhydride, entailing potentially enhanced consumption of acetic acid. This is not expected to have more than a marginal impact on the overall balance of the market, which is fundamentally well supplied in Europe.
One factor that could have influence how much acetic acid is sold from which sources is the value of the euro on the currency markets. Europe has one large-scale production unit, BP’s plant in the UK.
The pound has weakened against the dollar and, if this should remain the case in the period before the UK exits the EU, product from the BP unit should be competitive against what is imported, mainly from the USA or Saudi Arabia.
Imports from the latter are believed to have been relatively low-key in 2017 but it is thought that the producer is likely to increase its sales into the European theatre over the next twelve months.
INEOS, which used to operate a large vinyl acetate monomer (VAM) plant alongside the BP acetic acid plant, has announced its intention to open up a 300,000 tonne VAM facility.
This is not scheduled to come on line until 2020, and its location still has to be made known, possibly adding to some of the scepticism that surrounded the announcement. However, on the assumption that the project goes ahead, perhaps especially if the chosen site happens to be in the north-east of England, it may be expected that before too long more BP acetic acid will be consumed in that operation. The implications of that for the European market could be substantial.
By Peter Gerrard