Acetic Acid Market Sees Price Correction as Downstream Demand Weakens

Chemical Price

• Importers have reduced Acetic Acid prices today by ₹1/kg, bringing them to ₹36++ per kg ex-Mumbai on advance payment terms for end users. Traders are offering prices at ₹37++ per kg ex-Mumbai on advance payment terms.
• In Kandla, Acetic Acid offers are at ₹35++ per kg on advance payment terms, and ₹36++ per kg for 60-day credit terms.
• Bulk deals were reported in the range of ₹36.00++ per kg ex-Mumbai and ₹34.50++ per kg ex-Kandla on 60-day credit terms.
• The price reduction is attributed to weak downstream demand due to heavy rainfall and floods in Gujarat and southern regions.

Chemical Demand & Supply

• Demand remains weak due to poor downstream consumption, as many packaging, inks, and pharmaceutical manufacturers in Andhra Pradesh and Gujarat are not operating at full capacity because of the floods.
• Additionally, primary consumers like Ethyl Acetate manufacturers are running at lower capacities due to conversion losses.
• Consequently, Acetic Acid demand has decreased significantly in the first week of September 2024.
• However, demand from amines and bulk drugs was strong in August, and market participants are optimistic about September as well.
• Supply remains ample, with continuous vessel arrivals leading to inventory build-up at all ports due to sluggish liquidation.
• Traders and bulk buyers are not in a hurry to purchase, anticipating further price corrections, as the Asian benchmark FOB China prices have fallen by nearly $38/MT over the last 10 days.
• Therefore, a rebound in Acetic Acid prices in the short term seems unlikely. Some market participants have noted that the replacement cost is currently cheaper than the spot market price.
• India's monthly demand for Acetic Acid is approximately 125 Kt, with major consumers such as Ethyl Acetate, MCA, and Acetic Anhydride accounting for nearly 65% of total demand.
• For the fiscal year 2024-25, Acetic Acid demand in India is projected to grow by 5.5%, driven by a positive market outlook.
• Accord Organics Pvt Ltd, an Ethyl Acetate manufacturer based in Western India, has significantly expanded its production capacity, emerging as a key player and contributing to the overall growth in Indian Acetic Acid demand.

Chemical News

• In the international market, upstream crude oil benchmark WTI prices decreased by 0.45% to $69.83/barrel.
• Natural gas prices increased by 0.22% to $2.20/MMBtu.
• FOB China Acetic Acid prices were at $365/MT, a decrease of nearly $38/MT this week.

Expert Opinion

It is expected that Acetic Acid prices are expected to remain bearish this week in both the international and domestic markets due to poor downstream demand. In the domestic market, a rebound in prices is likely to take time due to lower replacement costs. Hence, buyers are advised to explore inventory opportunities during price lows.