Bulls and bears intertwine for ACN industry

In July, although there were no apparent signs of operating rate increase on demand side, acrylonitrile prices continued to show relative strength mainly due to increased production cuts on the supply side. Tianchen Qixiang's ACN unit has been shut since late June and hasn't resumed operations yet. Only one of Jiangsu Sierbang's 260kt ACN unit is running, while the other two units were still shut for maintenance. And PetroChina Fushun's ACN unit has been shut on Jul 17 for maintenance, which was expected to last for about a month. As a result, the ACN prices in July are supported. However, the relatively gentle upward trend in the chart below indicates that there is still pressure from actual transactions and follow-up trade activities.

Looking at August, Shanghai Secco's ACN unit is about to restart, and Jiangsu Sierbang's unit, which was shut in June is also scheduled to restart in August. Besides, with the imminent start-up of Tianchen Qixaing's unit, the ACN supply is expected to increase significantly. Compared with the maintenance of PetroChina Fushun's unit in Shandong, the restart of the above units will have greater impact on the supply in Shandong. As a result, the market has a bearish expectation for August.

From a data perspective, assuming that the three units mentioned above will restart and operate at half of their capacity, and taking into account the offset of the loss caused by the maintenance of PetroChina Fushun's unit, the supply increase is estimated to be around 23kt. On the demand side, with the current rise in acrylic fiber inventories, several plants have maintained production cuts. Therefore, there is limited room for a significant rise in ACN operating rate due to high temperatures, except for the boost provided by improved ABS profits and delivery orders. It is estimated that ABS plant operating rates in August will increase to about 80% or slightly higher, with an estimated demand increase of about 14kt at a 10% growth rate for ACN. As such, theoretically, the supply surplus pressure will continue to increase in August. At the same time, given the slight upward trend in July, there is a relatively large possibility of a downward trend in August, and selling at low prices is likely to appear.

In summary, the sales pressure on acrylonitrile is expected to increase due to the weak demands. However, propylene prices are currently in a relatively low level in the year. It is still possible that ACN plants will cut production further when there is a gradual recovery in propylene prices in the future.