Asia ACN under pressure from weak domestic China market

26 March 2018 06:43 Source:ICIS News

SINGAPORE (ICIS)--Asia’s acrylonitrile (ACN) prices are softening under the pressure of a sharply weaker Chinese domestic market but losses may be capped and minimised if ongoing constraints in international supplies do not ease soon.

In the week of 22 March, notional pricing indications for northeast Asian-origin cargoes were within the $1,900’s/tonne range for April shipment to China, market sources said.

In contrast, March cargoes changed hands just two weeks ago at up to $2,000/tonne CFR (cost and freight) China.

But for China-based importers, at current pricing indications, US dollar-denominated cargoes are still “way too expensive”, considering how much domestic yuan-denominated prices have fallen in the last few weeks.

On 22 March,  Chinese yuan-denominated ACN prices stood at an average of CNY 14,000/tonne, more than 9% lower than a month ago, ICIS data showed.

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Chinese ACN makers had cut prices to stimulate domestic demand from the key downstream acrylic fibre sector.

But the slump in yuan ACN prices invariably also killed the country’s buying appetite for US dollar-denominated imports, for which China is otherwise a typically important outlet for regional materials.

“Now that domestic products are so attractively priced and amply supplied,” there is no imperative to look elsewhere for cargoes, a China-based trader said, unless imports are “well below $1,900/tonne CFR China.”

Even so, China-based market players said that this is only a notional indication, as otherwise, based on a simplistic netback from current domestic pricing levels, imports have to be nearer $1,800/tonne CFR China to be competitive with domestic supplies.

But regional producers seemed at ease with the bearish turn in buy-side sentiment within China, as there was “no selling pressure”, said one of them.

They saw no need to moderate US dollar-denominated CFR China offers just to close sales, as fundamentally supplies outside of China are tight and will continue to remain so for some time to come, since there is a whole series of turnarounds planned across the region for the next couple of months.

Even for the few regional plants that have already returned from maintenance in the February-March period, their inventories are not high, and  coupled with heavy contractual obligations, there is simply “so little surplus” left for spot sales to begin with, a producer said.

Deep-sea origin supplies are not as forthcoming as well, given a tight demand/supply balance in the US and Europe.

As such, “unless spot prices are suitable”, Asian producers will be careful not to chase spot deals at the expense of inventory or contractual requirements, a regional trader said.

Even if CFR China trade does not materialise, regional traders are also confident that import prices in other regional outlets, such as India, will still hold up well enough.

Unlike China, India is reliant almost fully on ACN imports, and traders are confident that the demand there will help to cushion any potential dent in Chinese import volumes.

2018 Turnaround Schedules for Asian ACN plants outside of China

Company Name/Location Capacity (tonnes/yr) 2018 Turnaround Schedules
Taekwang Industrial Co/Ulsan 290,000 Completed from 25 Feb – 18 Mar
Tongsuh Petrochemical/Ulsan 245,000 No 3 To shut down from H1 October for one month
Tongsuh Petrochemical/Ulsan 245,000 No 4 To shut down from 9 May - 4 June
China Petrochemical Development Corp (CPDC)/Kaohsiung 240,000 To shut down for 7-10 days from15 May, and to shut down in Nov for two weeks
Sumitomo Chemical/Nihama 70,000 To shut down in September

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Focus article by Lim Ai Teng  

By Ai Teng Lim