Acetic acid price plummets with oversupply exacerbated

East China acetic acid price has declined from 5,600yuan/mt in end-Jan prior to the Spring Festival to 3,850yuan/mt as of Feb 24, down a whopping 31%.

During Spring Festival holiday, acetic acid plants in Shandong and Tianjin cut operating rates, due to environmental protection requirements in regions neighboring to Beijing during Olympic Winter Games. An acetic acid plant in Henan Province shut due to shortage of storage space, while other plants were running stably. However, several downstream plants were shut for holiday. The operating rates of PTA and acetic ester plants declined notably.

Meanwhile, acetic acid plant operating rate hovered high, and Guangxi Huayi had raised the operating rate of its new 700kt/yr acetic acid plant to about 80% after the startup in end-Jan. It exacerbated the oversupply in acetic acid market.

In terms of product inventory, it increased drastically in acetic acid plants after the holiday, up from 110kt prior to the holiday straight to 190kt after the holiday. With Henan Shunda’s plant shut in early Feb and some plants resuming delivering, the inventory reduced slightly. However, the reduction was quite small and inventory maintained at record high.

With acetic acid market turning oversupplied, the price slumped and profit got squeezed sharply to a more reasonable range. As of Feb 24, the profits was theoretically at around 1,100yuan/mt, but only 300-400yuan/mt for some producers due to high purchasing cost of feedstock methanol and financial cost.

In a conclusion, acid acid plants could still make profits and the price is expected to decline further until it finds support from the cost unless there’s producer cutting production.