SINGAPORE--Acetic acid prices are poised for further declines during the Beijing Olympics in China next month on sluggish demand and ample supply, local producers and buyers said on Thursday.
Demand from the downstream solvent acetate, purified terephthalic acid (PTA) and monochloroacetic acid (MCA) sectors had weakened in July as the recent hike in prices to above yuan (CNY)6,000/tonne ($881/tonne) ex-tank driven by tight supply had taken a toll on buyers, a key eastern China-based producer said.
Chinese domestic prices had hit a high of CNY6,800-7,400/tonne ex-tank in the third week of June the highest in 2008 on a heavy turnaround season. Prices have since fallen CNY700-900/tonne to trade at CNY6,100-6,500/tonne ex-tank in eastern China this week.
The rapid hike in raw material costs had made it difficult for producers of derivative products to raise their prices sufficiently to reflect the higher costs due to weak end-user demand.
As a result, the majority of solvent acetate producers in south China were forced to shut down their plants for almost two months while the average plant operating rate in the industry was at a low 30%. Almost all of them expressed muted interest in purchasing acetic acid, even though prices had plunged.
"We won t consider buying acetic acid unless we can get more orders from end-users but we have not received much demand for solvent acetate these days," said a Zhongshan-based solvent acetate producer in the southern Guangdong province.
Producers in east China who had shut down their plants were yet to resume production due to weak derivative demand. This prompted acetic acid producers to start lowering offers from the end of June to encourage buying interest, leading to price falls.
"We have to consider our buyers affordability," a major acetic acid producer in east China said. "The only way to move cargoes now is to drop prices and there s no clear indication of the bottom price yet."
The combination of electricity supply curbs during summer and transportation restrictions on toxic chemicals before and during the Beijing Olympics were expected to further aggravate operating conditions in the downstream sectors, market participants said.
"Demand may only improve after the Olympics because currently, there are electricity supply curbs for industrial usage during summer, and raw material deliveries to factories due to the Beijing Olympics have served to reduce operating rates at downstream plants", the same acetic acid producer added.
Acetic acid prices in north China were trading lower at CNY6,300-6,400/tonne delivered (DEL) this week due to feeble demand from MCA producers, who had cut operating rates by 40% to 30-40% following restrictions on the transportation of dangerous goods such as chlorine.
Adding to acetic acid sellers woes were fresh supplies from new capacities in eastern and northwest China that were coming on stream in July and August.
Despite weak demand, Chinese domestic acetic acid producers did not intend to reduce their plant operating rates, as they were still able to achieve some profit margins.
"Maybe we will continue to lower our offers, but we will not consider reducing our production volume," a major acetic acid producer in east China said.
Import offers were also heard lower in line with lower domestic offers. A northeast Asian producer adjusted down its price target for second half of July loading spot lots by $30/tonne to $740/tonne CFR (cost and freight) NE Asia but the offer drew lukewarm interest from importers, who were steering clear of the spot market due to the bearish market sentiment.
The Beijing 2008 Olympic Games will be held from 8 to 24 August, 2008
Demand from the downstream solvent acetate, purified terephthalic acid (PTA) and monochloroacetic acid (MCA) sectors had weakened in July as the recent hike in prices to above yuan (CNY)6,000/tonne ($881/tonne) ex-tank driven by tight supply had taken a toll on buyers, a key eastern China-based producer said.
Chinese domestic prices had hit a high of CNY6,800-7,400/tonne ex-tank in the third week of June the highest in 2008 on a heavy turnaround season. Prices have since fallen CNY700-900/tonne to trade at CNY6,100-6,500/tonne ex-tank in eastern China this week.
The rapid hike in raw material costs had made it difficult for producers of derivative products to raise their prices sufficiently to reflect the higher costs due to weak end-user demand.
As a result, the majority of solvent acetate producers in south China were forced to shut down their plants for almost two months while the average plant operating rate in the industry was at a low 30%. Almost all of them expressed muted interest in purchasing acetic acid, even though prices had plunged.
"We won t consider buying acetic acid unless we can get more orders from end-users but we have not received much demand for solvent acetate these days," said a Zhongshan-based solvent acetate producer in the southern Guangdong province.
Producers in east China who had shut down their plants were yet to resume production due to weak derivative demand. This prompted acetic acid producers to start lowering offers from the end of June to encourage buying interest, leading to price falls.
"We have to consider our buyers affordability," a major acetic acid producer in east China said. "The only way to move cargoes now is to drop prices and there s no clear indication of the bottom price yet."
The combination of electricity supply curbs during summer and transportation restrictions on toxic chemicals before and during the Beijing Olympics were expected to further aggravate operating conditions in the downstream sectors, market participants said.
"Demand may only improve after the Olympics because currently, there are electricity supply curbs for industrial usage during summer, and raw material deliveries to factories due to the Beijing Olympics have served to reduce operating rates at downstream plants", the same acetic acid producer added.
Acetic acid prices in north China were trading lower at CNY6,300-6,400/tonne delivered (DEL) this week due to feeble demand from MCA producers, who had cut operating rates by 40% to 30-40% following restrictions on the transportation of dangerous goods such as chlorine.
Adding to acetic acid sellers woes were fresh supplies from new capacities in eastern and northwest China that were coming on stream in July and August.
Despite weak demand, Chinese domestic acetic acid producers did not intend to reduce their plant operating rates, as they were still able to achieve some profit margins.
"Maybe we will continue to lower our offers, but we will not consider reducing our production volume," a major acetic acid producer in east China said.
Import offers were also heard lower in line with lower domestic offers. A northeast Asian producer adjusted down its price target for second half of July loading spot lots by $30/tonne to $740/tonne CFR (cost and freight) NE Asia but the offer drew lukewarm interest from importers, who were steering clear of the spot market due to the bearish market sentiment.
The Beijing 2008 Olympic Games will be held from 8 to 24 August, 2008
