China ACN: transportation blocked, digestion slows down

Since early Mar, many regions in China implement control management affected by the epidemic, and logistics is also restrained. The deliveries of ACN in Shandong and Jiangsu markets have been affected. Many market insiders have worked at home, and the slower transportation directly affect the digestion of inventory in plants. Currently, the inventory in KoRuhr has piled up, but it has maintenance plan in Apr, so the inventory will be supplied to customers during the maintenance time.

Currently, ACN market gradually climbs up based on supply and costs, and foreign ACN prices rise much, stimulating Chinese exports. Nevertheless, the regional transportation slows down affected by the epidemic, so we analyze the influences from different time and bodies.

For producers, the most direct influence is the increasing inventory. PetroChina Jilin cuts the operating rate to 80% and it may cut the operating rate further. Jiangsu Sierbang runs at 80% previously, but now, the O/R is cut to 75%. For traders, the sales plan is disrupted affected by the epidemic and selling pressure is increasing. With firm offers from producers and unsmooth deliveries, their operation space is limited, and most of them sell products to nearby places to complete the plan. For downstream markets, the delivery of feedstock is prolonged affected by the epidemic, and some of them may purchase spot ACN nearby for urgent demand, so trading prices may have regional difference.

For the time span, the epidemic control measures mainly appear around mid-month. Some transactions have been concluded previously. Later, supply is supposed to be tighter with maintenance plan. In short, the epidemic is expected to affect the spot market mainly, and for long run, it may affect the contract sales. Downstream plants may require to deliver the products earlier. 

In general, under the supply reduction and long-time control measures, downstream demand may come earlier, offsetting the influences of increasing inventory. For traders, in face of selling pressure, they are not willing to raise prices. Moreover, downstream plants are likely to curtail production with the feedstock delivery pressure. Therefore, the ACN market sees both bullish and bearish factors, and prices may be in consolidation.