Acetic acid weighed down by ample supply and lukewarm demand

China acetic acid profits have been squeezed heavily since 2022. The price has declined to around 3,500yuan/mt and may further move lower slightly. Feedstock methanol is impacted by weaker economic expectation and slump in crude oil, but methanol price drop is slower than that in acetic acid. Therefore, the theoretical profit for acetic acid has dropped below 1,000yuan/mt, and according to the feedstock from producers, the profit is approaching break even line.

Acetic acid plant inventory increases gradually with supply recovering. Yangtze INEOS’ 500kt/yr plant, Nanjing Celanese’s 1.2 million mt/yr plants, and Shandong Yankuang’s 1.2 million mt/yr plants restarted in the latter half of Jun, leading to fast increase in acetic acid plant operating rate and recovery of supply. However, lukewarm demand and rising supply have led to continuous decline in acetic acid price.

With days of price losses, some producers are mulling production cuts. Though plants of Shanghai Huayi and Hengli Petrochemical are still under maintenance in Jul, and some plants cut operating rates fractionally, ample acetic acid supply is available in Jul. In terms of demand, end-use consumption is slow with product inventory increasing, and China domestic PTA plant operating rate falls obviously. It is difficult for acetic acid to rebound with ample supply could with lukewarm demand.

Nanjing Celanese plans to shut its acetic acid plants this week for 10 days, and when the shutdown is implemented, the price could get supported in the short term. However, in the longer run, there will new plants with combined capacity up to 3.4 million tons coming on stream in 2022-2023, outpacing the demand growth. Any improvement in acetic acid profit could be capped, and acetic acid price is expected to hover around the break even line.