China ACN prices surge in Sep, while may weaken in Oct

In September, the acrylonitrile industry, driven by manufacturers, has witnessed its longest and most substantial price hike since Q3, with prices up from 8,200yuan/mt in mid to late August to 9,500yuan/mt by September 22, marking an increase of approximately 15.9%. However, with a slight shift towards consolidation around mid-September, there is concern about the settlement price for the month. Pessimistic expectations suggest around 9,600yuan/mt and more cautious observers expect around 9,500yuan/mt.

The primary factor behind this notable surge is the robust performance of the raw material, propylene.

Due to reduced raw material supply caused by the maintenance of Shandong's PDH unit and increased demand, propylene prices have significantly risen from 6,625yuan/mt in mid to late August to 7,125yuan/mt, marking an increase of 7.6%. At the same time, liquid ammonia prices have also surged. This has led to increased cash flow pressure in the acrylonitrile industry, with the theoretical production costs estimated around 9,900yuan/mt, based on current raw material prices. Plants with upstream equipment might have slightly lower costs, yet they unlikely to gain profits. Consequently, many plants are eager to raise prices, resulting in a phased and relay-style increase in offers.

Regarding demand, the operating rates of acrylamide and acrylic fiber are steady. In addition, the stocking activities last month do not led to the dumping of low-priced supplies to suppress raw material price increases. This allow acrylonitrile prices to continue rising. However, there is growing pressure on trading at higher level at present, and the potential for significant price decreases is limited due to settlement expectations. Prices are gradually stabilizing within the range of 9,300-9,500yuan/mt unless there is a significant low-priced sell-off before settlement.

Looking ahead, there are adjustment on the supply side due to alternating unit maintenance schedules (the restart of PetroChina Fushun, the maintenance of Liaoning Kingfa, and Shandong Haijiang in October). On the demand side, some AF units are scheduled for maintenance in October, leading to a simultaneous reduction in supply and demand. There is a possibility of additional unit restarts driven by improved cash flow, especially if propylene weakens. Furthermore, given the high trading prices in the industry, there is an increasing likelihood of downward price pressure. Overall, the market is likely to weaken in October.