Acrylonitrile: tepid market with limited fluctuations

Since July, the acrylonitrile market has declined stepwise, with prices dropping from 9,300 to 9,075 yuan/mt by July 23. This decrease is due to ample supply and weak demand, putting pressure on sales and profits. Current theoretical cash flow is close to the cost line.

The potential for future recovery should be assessed based on the fundamentals.

In terms of costs, propylene prices fluctuated up in July. For low-profit acrylonitrile, rising raw material costs mean losses. Considering the potential increased demand for polypropylene in the second half of the year, propylene prices could rise further.

On the supply side, aside from PetroChina Jilin's maintenance in August, there are no new updates on unit adjustments. With abundant supply, price support remains weak. Rising costs may increase the chance of additional production cuts, especially for non-integrated units, which face higher costs and are more likely to cut production.

Demand is unlikely to increase significantly in the near future, as both ABS and acrylic fiber are currently at or below cost levels, which reduces the incentive to raise operating rates. While there may be some improvement in end-user demand for acrylic fiber in August, yarn mills are focused on reducing high inventories, which will take time to affect acrylic fiber plants. ABS plant saw a temporary demand boost in mid-July due to maintenance but has since declined, with losses widening and operating rates staying low.

Overall, demand for acrylonitrile is expected to stay weak, limiting price increases. If costs rise, the industry may need to cut production to stabilize cash flow, or face increasing losses. The current market allows for adjustments, and bottom-fishing may be more noticeable when plant and trader goals align. However, for experienced participants who have dealt with greater market fluctuations, the current volatility may seem relatively mild.