Acetic Acid Prices Dip Amid Weak Demand and Lower Replacement Costs

Acetic Acid prices have dropped by Rs 0.5/kg today. The supply remains steady, but demand from key sectors like Ethyl Acetate has weakened, contributing to bearish market sentiment. In the international market, upstream crude oil prices have risen modestly, while natural gas prices also show an increase. Market participants anticipate a potential rebound in Acetic Acid prices post-October if Vinyl Acetate Monomer (VAM) prices recover.

Key Takeaways:

  • Price Decline: Acetic Acid prices have dropped to Rs 35.50++ per kg ex-Mumbai and Rs 34.50++ ex-Kandla, with bulk buyers seeking lower rates.
  • Weak Demand: Demand has weakened significantly, particularly from Ethyl Acetate and bulk drug sectors, contributing to bearish market sentiment.
  • Steady Supply: Acetic Acid supply remains stable with consistent vessel arrivals, but demand has notably slowed.
  • International Price Increases: Upstream crude oil prices rose by 1.52% to $71.84 per barrel, and natural gas prices increased by 2.29% to $2.39/MMBtu.
  • Potential Future Price Rebound: Market participants anticipate potential price rebounds post-October if downstream prices, like VAM, recover.

Chemical Prices

  • Acetic Acid prices have been revised downward by importers, dropping by Rs 0.5/kg to Rs 35.50++ per kg ex-Mumbai and Rs 34.50++ per kg ex-Kandla on 60-day payment terms. However, traders' offers varied, with lower prices for advance payment transactions.
  • Bulk buyers have shown interest in purchasing at Rs 34.00++ per kg ex-Mumbai on 60-day credit terms, but importers are hesitant to sell at these levels. Buyers expect prices to fall further due to weak downstream demand and lower replacement costs.
  • The decline in Acetic Acid prices is primarily due to reduced replacement costs and weaker demand from Ethyl Acetate and Acetic Anhydride manufacturers.

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Chemical Supply & Demand Analysis

  • Acetic Acid supply remains steady with consistent vessel arrivals. However, demand has been notably weak, particularly from the Ethyl Acetate sector, as the bulk drug and extraction manufacturing industries have slowed down. This sluggish demand has contributed to a bearish market sentiment.
  • In contrast, demand from the pigments, dyes, and amines segment was strong during the first half of October. However, the second half of the month has seen reduced demand due to lower production rates leading up to Diwali, according to market participants.
  • Demand for Mono Chloro Acetic Acid (MCA) has been subdued this week, as reduced production rates in the bulk drug manufacturing sector further weakened market conditions.
  • Last week, traders had anticipated an uptick in downstream CFR China Vinyl Acetate Monomer (VAM) prices, which was expected to support the market, but it did not provide any uplift for Acetic Acid prices.
  • India’s monthly Acetic Acid demand is approximately 125-130 kt, with key downstream sectors such as Ethyl Acetate, Acetic Anhydride, and MCA consuming nearly 65% of the total volume.

Chemical Market News

  • In the international market, upstream crude oil benchmarks have shown modest gains, with WTI prices rising by 1.52% to $71.84 per barrel. Additionally, natural gas prices increased by 2.29%, reaching $2.39/MMBtu.
  • In plant-related developments, Oriental Petrochemicals, a leading PTA producer based in Taiwan, announced a scheduled plant shutdown from early September to mid-October 2024.
  • The plant, with an annual production capacity of 1.5 million tons, may potentially influence market dynamics in the region.

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Expert Insights: Anticipated Price Rebound Post-October

Acetic Acid prices are expected to remain mixed this week, driven by steady vessel arrivals and weak demand from the Ethyl Acetate, Amine, and bulk drug industries. However, many market participants anticipate a price rebound post-October, driven by a recovery in VAM prices.