China acetic acid to resume downtrend on weak demand

SINGAPORE (ICIS)–China’s acetic acid spot market prices may continue their downtrend after a brief pause in the second half of December due to relatively stable supply and weak demand.

Shipping containers at the the port of Qingdao, in China (Source: Sipa Asia/REX/Shutterstock)

On 19 December, spot average domestic prices in east China stood at yuan (CNY) 3,800/tonne ($550/tonne) ex-tank, down 17.4% from the start of the year and 33% lower from the peak hit in early June, according to ICIS data.

Some exporters and downstream buyers picked up cargoes in quick succession from mid-December following sharp falls at the start of the current month, thereby temporary halting the price decline.

This provided some relief to acetic acid producers in central and north China which were grappling with high inventory.

Most acetic acid plants in the country were running at high rates, posting the highest average of 89% in the week ended 14 December, as the facilities of major producer Jiangsu Sopo Chemical restarted. Overall production may rise further in the near term.

Market players expect supply to be sufficient in January in spite of a scheduled turnaround at a 420,000 tonne/year plant operated by Yangtze River Acetyl Corp (Yaraco).

Eyes are also on production in north China, which may be restricted in the near term as the government limits the industrial use of coal to ease pollution levels in the region during the winter season.

Logistics problems may also arise for acetic acid trades as the chemical easily freezes at low temperatures, while market activity typically slows down ahead of the week-long Lunar New Year and Spring Festival in China on 4-10 February.

On the demand front, downstream ethyl acetate (etac) producers have started to replenish their inventory of feedstock acetic acid from the middle of December. Etac producers are keen to boost production amid steady prices of their product.

But the upcoming long holiday would weaken demand as downstream acetate plants typically shut down during this period.

In the purified terephthalic acid (PTA) sector, another major downstream of acetic acid, operating rates of plants have rebounded to around 80% in December from 72% in November, and may keep running at this high level in the near term. This will, in turn, support acetic acid demand.

From downstream vinyl acetate monomer (VAM) sector, demand will be soft as Sichuan Vinylon’s two plants with a combined 500,000 tonne/year capacity will shut for four to six weeks from end-December, while most other VAM plants in China were running at low rates.

On the export front, demand from major market India may be soft as it was able to secure spot acetic acid cargoes from the Middle East and southeast Asia at relatively low prices.

Focus article by Anna Xiang

($1 = CNY6.91)

ICN