Tight Europe etac supply, falling Asia prices open arbitrage

19 July 2018 18:58 Source:ICIS Chemical Business

European spot prices for ethyl acetate (etac) rose sharply in June, reaching levels not seen since 2002, opening the arbitrage window for cheaper Asia supply in July.

The ICIS mid-point rose by 22% from €1,070 tonne FD (free delivered) NWE (northwest Europe) in the week ending 1 June to €1,310 FD NWE in the week ending 29 June.

Prices rose in early and mid-June as tightening supply allowed earlier increases in feedstock acetic acid costs to be passed through to etac prices. Prices also increased late in June on supply tightening further as INEOS began maintenance at its Hull, UK plant.

INEOS is the largest producer of etac in Europe, and sources have said there has been limited activity in the spot market from the producer since late June.

This restriction of supply has been made more severe by occurring during June and July – the peak season for etac demand from the coatings sector.

Rising prices and tightening supply conditions have opened an opportunity for arbitrage from Asia, where prices have been falling in recent weeks.

Asian etac has fallen 12.4% since 1 June to $955/tonne FOB (free on board) China, in the week ended 13 July. The decline tracked soft acetic acid prices in Asia on the back of increased supply after plants resumed operations after shutdowns.

June and July are typically lull season amid hot and rainy weather where demand slows down from the paint and coating end users.

A producer in China reported it had concluded deals for around 1,000 tonnes, transported in isotanks, with shipment from mid-July onwards. Typically, a shipment from China to Europe takes about 25-30 days.

Meanwhile, a global producer with an etac/butyl acetate (butac) swing plant in southeast Asia said it is planned to send 2,000-3,000 tonnes of materials to Europe in July due to the better netbacks, according to sources.

Some discussions are ongoing between suppliers and traders.

The INEOS maintenance is expected to be completed at the end of July. It also is likely that a previously announced 100,000 tonne/year expansion project will be completed during this maintenance, greatly increasing domestic capacity in Europe.

European supply will not immediately rebalance when the INEOS plant restarts, but this is a brief window of opportunity for Asian exporters who have a significant lead time before material arrives in Europe.

An etac exporter in India said it was sold out of material for arrival in Europe in July, but added that demand for material with August arrival was being much weaker.

“As of now, I find resellers are very cautious,” the source said.

August will also bring seasonally low demand, which will put downwards pressure on prices alongside the improving availability of material following INEOS’s return to production.

Etac is used in coatings, pharmaceuticals and solvents.

By Nick Cleeve Li Li Chng