Asia etac outlook weakens on softer feedstock, supply overhang

The moderate downtrend in ethyl acetate (etac) prices in Asia is likely to continue amid the softer upstream market gauges and a growing supply overhang, market participants said on Thursday.

Etac prices declined in the week ended 17 March, the first downturn in four reporting weeks. Prices closed at an average of $732.50/tonne FOB (free on board) China on 17 March, a drop of 0.3% week on week.

The majority of Chinese etac makers who actively export material are offering cargoes at $720-730/tonne FOB China or the CFR (cost & freight) Asia equivalent this week, down from $730-740/tonne FOB China a week ago.

Amid the March slump in crude oil prices and the broader petrochemical market downturn, lackadaisical domestic and regional demand are fomenting a soft etac price outlook among market participants.

Although feedstock acetic acid prices in China are described by several etac producers as stable, some market participants said that it is only a matter of time before acetic acid price weaken alongside the losses in the methanol sector.

Meanwhile, the recent drop in raw material cassava prices also point to further downside in co-feedstock ethanol prices, a Chinese etac maker said.

Tepid domestic etac buying activity and a slowdown in South Korean demand for Chinese material were the most commonly cited reasons for etac market participants’ soft outlook.

"We have seen a significant year-on-year drop in our domestic sales," said a Chinese etac producer.

"There are no positive factors on the horizon," a separate Chinese etac producer said.

The pace of recovery in domestic demand since the end of the Lunar New Year holiday in early February has been slower than anticipated.

Furthermore, demand from the coating, printing ink and petrochemical solvents sectors has been stifled by the Chinese governments' crackdown on polluting industries.

"Whether you look at it from the feedstock point of view or from the supply/demand point of view, etac is a buyers' market," a Chinese trader of etac said.

With upstream market gauges failing to signal any etac price upside, the tightening in China's etac product availability in recent months has not helped to provide a floor for prices.

The availability of Chinese etac has been crimped by output caps, plant maintenance and earlier production issues.

Guangxi Xintiande Energy has been capping its etac plant run rate at 40% capacity since early February in the face of slow domestic and export demand.

Compatriot Wuxi Baichuan Chemical Industrial’s longer-term etac production level is maintained at 40-50% capacity.

In addition, Shandong Yankuang is carrying out 15 days of maintenance work at its etac and acetic acid plants this month, according to the China editorial team at ICIS.

Jiangsu Sopo's etac plant run rate was restored in early March, following the restart of its acetic acid unit from an unplanned outage.

Expanding domestic etac capacity in South Korea, one of China's key export markets, is also curbing South Korean demand for Chinese material.

The operating rate at South Korean producer Korea Alcohol Industrial's new etac plant has exceeded 90% capacity, following an early-March start-up.

China exported 400,901 tonnes of etac in 2016, a drop of 1.2% from 2015, according to the country's Customs data.

China, with 3.45 m tonnes/year of capacity, is Asia's largest producer of etac.