Acetic acid plunges due to oversupply

After the rebound in May, China acetic acid market headed south with price plunging in Jun. Acetic acid nosedived, but how does this come?

On supply front, product inventory in acetic acid plants was not high, estimated at around 150kt as of Jun 20. However, with plants restarting, the inventory was expected to increase. Yangtze INEOS restarted its 500kt/yr plant on Jun 9, Shandong Yankuang restarted its plants with combined capacity of 1 million mt/yr on Jun 17, and in addition, Celanese Nanjing was poised to restart its 1.2 million mt/yr acetic acid plants in late Jun. Though Shanghai Huayi plans to shut its plant in end-Jun for maintenance, the overall supply is expected to increase this month.

In Henan Province, as small and medium sized downstream plants shut intensively, delivery of acetic acid slowed down and producers lowered prices to boost sales. Therefore, market sentiment in surrounding regions was dampened.

On demand side, China PTA plant operating rate was recovering, but some large plant has maintenance plan. Meanwhile, acetic acid consumption per ton PTA was small, hence support from rising PTA plant operating rate was limited. In downstream acetic ester sector, plant operating rate was low and profits were weak due to high-priced acetic acid earlier. In addition, the pandemic earlier dealt a blow to end-use consumption, and it would take time for downstream demand to recover.

In a conclusion, acetic acid market declined due to increasing supply as well as weak demand. Though China acetic acid exports were expected to increase due to plant shutdowns in the US in H2 May, the export volume was lower than expected, as US Celanese had restarted its plant and China acetic acid exports were restricted by high inventory in India. It would be difficult for acetic acid to move up with oversupply.