Glacial acetic acid price hits 10-year high, driven by tight supply

China glacial acetic acid price has hiked exponentially after the Lunar New Year holiday, soaring to as high as 6,400yuan/mt after breaking through 6,000yuan/mt level, and hitting 10-year high. Compared to the level of 4,175yuan/mt in early Jan, acetic acid price has advanced sharply by 53.3%. As a result, the profit of acetic acid production in China has increased significantly to above 3,600yuan/mt, also touching 10-year high.

On supply front, China acetic acid capacity growth is slowing down in recent years, and most plants have been running for long period. Plant operating rates have been kept high, with the improvement in profits since the latter half of 2020, however, it leads to more frequent technical issues on those old plants. Since the beginning of 2021, several plants have been experienced shutdown or operating rate cuts to deal with the technical issues, accounting for 69% of the total capacity. As a result, acetic acid supply is tight for much of the time.

In terms of demand, the applications of acetic acid are mainly in PTA, acetate and vinyl acetate. China PTA capacity is expanding fast in recent years, with 13.70 million mt/yr of new capacity (including Honggang’s 2.5 million mt/yr new capacity) added since the beginning of 2020, driving up demand for acetic acid. To produce a ton PTA requires 29-40kg acetic acid, varying by different PTA plants, and the requirement averages 35kg a ton. Consumption of acetic acid is calculated at 150-160kt a month based on PTA production in China, up 20-30kt from the same period of last year.

In addition, China acetic acid supply further tightened as the export volume increased. Celanese shut its acetic acid plant in the US due to the deep freeze and power outage, and announced to reduce the selling volume of acetic acid and vinyl acetate while allocating China-origin materials to other regions such as Europe. Offers for China-origin Apr acetic acid cargoes are now quoted at around $900-950/mt FOB China.

In short term, with some plans under maintenance, the supply shortage continues. Huayi’s 500kt/yr new plant would come on stream in May-Jun at the earliest. As for demand, it is largely stable, but some downstream plants have shut or cut operating rate due to poor economics, but the impact on acetic acid is limited. In export market, the enquiry remain active and the export volume remains large. China acetic acid market is expected to consolidate at highs amid low inventory.