By Shao Shouyan, Zhu Guisheng, Peng Fencheng, Liao Hongwei, Jiangsu SOPO (Group) Co., Ltd.
The acetic acid market in the first half of 2017 was relatively calm, but in the second half of the year, the domestic market boomed, and prices climbed more than RMB1 500/t, reaching a 10-year record high. Overall, the domestic acetic acid market of 2017 exceeded the forecasts of market participants.
Balance of supply and demand now supports the rising market
Due to the state’s strategy of supply side reform, the growth of acetic acid capacity slowed down in recent years; no new production capacity was added in 2017, but demand increased in varying degrees, and supply and demand were close to balance, which provided internal support for the rise of the acetic acid market in 2017.
In 2017, domestic glacial acetic acid capacity was 8.72 million t/a, and the average annual operating rate was 86.56%, 2.68 percentage points higher than in 2016 (83.88%), and output was 7.5483 million tons, a YoY increase of 573.4 kt or 8.2%. In the last two years, the output of East China, Central China, Northwest China and Southwest China increased considerably.
The net export volume of acetic acid in 2017 was 441.5 kt. Domestic apparent consumption of acetic acid was about 7.13 million tons, a YoY increase of 260 kt, or 3.8%. In 2017, consumption of ethanol and sec-butyl ester in domestic downstream products declined, while the consumption of other products increased to varying degrees. In 2017, domestic consumption growth was attributable mainly to the manufacture of PTA, ethyl acetate, vinyl acetate and chloroacetic acid.
1. PTA
In 2017, the recovery of real estate demand led to a significant increase in demand for home textiles, increasing the demand for PTA significantly. At the same time, prohibition of the import of recycled waste also increased the market demand for raw chemical fiber to a certain extent, further driving the increase of PTA consumption. The average spot price of PTA in 2017 was RMB5 170/t, up by 12% YoY. The supply of PTA is expected to increase steadily in 2018, and the pressure of competition is higher than that of 2017. However, taking into account the release of new polyester production capacity downstream, it is forecast that the utilization of PTA capacity will increase in 2018, and imports will perhaps decline.
2. Ethyl acetate
Ethyl acetate capacity decreased slightly during 2017. In 2017, domestic ethyl acetate capacity was 3.27 million t/a, and the operating rate was close to 60 %. The reason is that the profit margin of ethyl acetate is still available. Downstream, the ink and adhesives industry is developing towards intensive, large-scale development, and export demand is increasing. The output of ethyl acetate increased significantly, consuming about 1.3 million tons of acetic acid, a YoY increase of 190 kt.
3. Vinyl acetate
The vinyl acetate industry has suffered from structural oversupply, and a reshuffle is still in progress. In May 2017, a 200 kt/a vinyl acetate unit of Hunan Xiangwei Co., Ltd. was shut down. In 2017, phase II unit of Inner Mongolia Mengwei Technology Co., Ltd. put into production in the second quarter and stable operation of polyvinyl alcohol unit in Great Wall Energy and Chemical Co., Ltd. supported the production of vinyl acetate with capacity utilization of 60%, consuming 1.04 million tons of acetic acid.
4. Chloroacetic acid
Domestic chloroacetic acid factories, mainly concentrated in the north, are numerous, but the scale is generally small. In recent years, backward production capacity has been eliminated more frequently. At present, the capacity of the industry is about 1 million t/a. In the first half of 2017, there were only a few large devices running, and some devices were affected by the sales difficulties of by-product hydrochloric acid, and the operating load was low, but by the second half of the year, the profit margin of chloroacetic acid was more than RMB1 000 per ton, motivating enterprises to increase their operating loads. The annual operating rate of the industry was about 55%, and the consumption of acetic acid was 500 kt, 80-90 kt higher than that of 2016.
Intensive equipment maintenance has been driving prices up
In February 2017, the SOPO plant in Jiangsu was overhauled in advance. In May, Wujing, Yima, Serra and BP stopped production to check and repair one after another. In mid-May, Asian plants began to overhaul a capacity of over 3 million t/a. The intensive maintenance of several sets of equipment contributed to a rise in acetic acid prices in 2017.
Unexpected factors drove up acetic acid prices
The impact of Hurricane Harvey at the end of August 2017 and the explosion of the Eastman Chemical Base in early October 2017 resulted in a gap in foreign supply, which in turn resulted in a surge of exports from China. In addition, the production equipment of 450 kt/a in Wujing, Shanghai shut down in mid-July for 3 months. These two factors led to a substantial reduction in the domestic supply, especially in East China. The impact of the short supply is evident, and prices are rising continually.
2018 Market: prudent and optimistic
Plants will continue to run at high loads in 2018, and production is expected to increase by about 100 kt. As for new production capacity as of the second quarter, Tianjian has a 100 kt/a expansion plan, Yankuang has 100 kt/a of idle capacity to release, and 350 kt/a of equipment belonging to Dalian Hengli is expected to produce products in October.
Downstream, capacity release will slow. Due to the high price of acetic acid, the profitability of some downstream products is not good, such as esterified alcohol, butyl ester, chloroacetic acid, glycine, which will affect the operating rate and may lead to a slowdown in the release of new production capacity, so the consumption of acetic acid is not expected to be great.
Supply and demand will be relatively balanced overall in 2018, and the prevailing market outlook for acetic acid in 2018 is cautiously optimistic.
