Domestic Acetic Acid Prices Firm on Local Buying, Despite Weak Global Benchmarks

Key Highlights

• Prices rose by ₹1.5/kg due to INR depreciation and local buying 
• Supply improved; no BIS barriers or jetty issues reported 
• Pharma demand weak; seasonal consumption in PTA and dyes rising 
• Short-term volatility expected due to weak global cues and tariffs

Domestic Prices Rise Despite Limited Spot Buying

• Importers raised Acetic Acid prices by ₹1.5/kg this week, with new offers at ₹33.50/kg ex-Kandla and ₹34.00/kg ex-Mumbai on 60-day credit terms for August liftings.
• However, some traders extended discounted offers due to ongoing storage constraints. Immediate lifting offers were heard in the range of ₹32.00–₹32.50/kg ex-Kandla and Mumbai, although these were limited in quantity.
• In the international market, the Asian benchmark FOB China dropped by $5/tonne this week owing to weak market fundamentals. Spot offers were seen in the range of $280–285/tonne FOB China for cargoes of 5kt and above for second-half August shipments. This translates to an approximate replacement cost of ₹31.00/kg for spot deals and ₹29.50/kg on a formula-based pricing structure after landing in India.
• Interestingly, domestic and international market trends remained divergent. A sharp increase in local prices is being attributed to active procurement by a major Indian acetyls manufacturer—typically reliant on imports—and a steep surge in the USD-INR exchange rate, according to a trader.

Supply & Demand: Domestic Supply Improves with No BIS or Logistics Constraints

• Supply conditions remain strong in India. A domestic producer ramped up run rates this week, complemented by steady import arrivals over the past two weeks.
• Additionally, the absence of BIS regulations on Acetic Acid imports has attracted global suppliers to the Indian market, ensuring continued supply availability, according to a prominent bulk drug manufacturer.
• Jetty-related logistical issues have reportedly been resolved, with no further vessel unloading disruptions anticipated, as per market sources.
• On the demand side, a decline was noted last month. Several acetyl manufacturers have been operating at reduced rates due to sluggish demand from the pharma sector and limited export opportunities.
• Nevertheless, seasonal demand from PTA, Dyes, and Pigments sectors is expected to support consumption.
• The recent anti-dumping duty (ADD) imposed on Acetonitrile has also bolstered domestic Acetic Acid consumption, with all local Acetonitrile manufacturers operating at full run rates.
• However, production of Ethyl Acetate, Acetic Anhydride, Diketene derivatives, and Mono Chloro Acetic Acid (MCAA) has slowed down, impacted by weak demand from the bulk drug sector.
• In contrast, demand for N-Butyl Acetate and N-Propyl Acetate has shown improvement, backed by strong operating rates in the printing ink and packaging industries. This is likely to extend some support to Acetic Acid offtake.
• Notably, the price spread between downstream FOB China Acetic Acid and feedstock CFR China Methanol shifted from -$12/tonne last week to +$14/tonne/mt this week, indicating some positive margin recovery.
• However, retaliatory tariffs by the US are expected to keep global market sentiment uncertain. While most international players are bearish, the Indian market may experience short-term volatility driven by domestic consumption patterns.

Indian Monthly Acetic Acid Demand Estimate: ~165 kt
PTA Manufacturers: 52 kt
Ethyl Acetate Manufacturers: 35 kt
Acetic Anhydride: 29 kt
Bulk Drug, Specialty Chemicals & Dyestuffs: 25 kt
Mono Chloro Acetic Acid (MCAA): 11 kt
Acetonitrile: 5 kt
Diketene & Derivatives: 3 kt
N-Butyl & N-Propyl Acetate: 2 kt
Other downstream users (reagents, food, beverages): 2 kt

• India's total monthly demand for Acetic Acid is around 165 kt. Looking ahead, the demand is expected to double by FY2027, driven by:
• Formson’s upcoming Acetic Anhydride backward integration project
• Greenfield projects by acetyl manufacturers for N-Butyl Acetate and N-Propyl Acetate
• A mega Vinyl Acetate Monomer (VAM) project by a leading paint manufacturer.

Global Energy and Feedstock Price Snapshot

In the international energy markets:
1. Crude Oil (WTI): $65.69/barrel
2. Natural Gas: $2.95/MMBtu
3. Feedstock Methanol (CFR China): $274/tonne
4. Downstream Acetic Acid (FOB China): $288/tonne

Market Outlook: High Volatility Amid Currency and Trade Shocks

• Expert expects domestic Acetic Acid prices to remain volatile in the near term, primarily due to appreciation of the US dollar.
• Coupled with weak pharmaceutical sector production and uncertainty arising from US tariffs, the overall market outlook leans bearish.
• As a result, buyers are advised to focus on spot deals in the current scenario. Lower replacement costs could trigger frequent corrections, adding to price volatility in the Indian Acetic Acid market.