Importers Anticipate a Significant Surge in Acetic Acid Prices: Will the Market Rebound as Expected?

Key Highlights:

1. Price Trends: Domestic prices rose by ₹0.5/kg today. Imported Acetic Acid is priced at ₹36.50++ per kg (Ex-Kandla) and ₹37.00++ per kg (Ex-Mumbai), with futures reflecting higher costs.
2. Demand Dynamics: India’s demand grew by 26% in 2024, driven by expanded Ethyl Acetate production and new VAM plant commissioning. 
3. Supply Constraints: Limited imports in late 2024, along with plant shutdowns in China, are creating tight supply conditions. 
4. Global Impact: Rising FOB China Acetic Acid prices ($330/MT) and reduced Chinese production due to shutdowns suggest further price hikes in January- February 2025.

Acetic Acid Prices Rise Amid Surging Chinese Replacement Costs

• In the domestic market, Acetic Acid prices rose by ₹0.5/kg today, despite GNFC revising its Ethyl Acetate prices.
• Imported Acetic Acid is currently being offered at ₹36.50++ per kg (Ex-Kandla) and ₹37.00++ per kg (Ex-Mumbai) under advance payment terms.
• Meanwhile, trader offers vary slightly, with rates at ₹36.00++ per kg (Ex-Kandla) and ₹36.25++ per kg (Ex-Mumbai) for similar payment conditions.
• Market participants have largely disregarded GNFC's Ethyl Acetate price correction as Acetic Acid prices experience a sharp rebound in China.
• The recent surge in FOB China Acetic Acid prices is driving higher replacement costs. Futures contracts for January and February shipments are now reflecting a higher price range. 
• This trend is largely attributed to annual contract renewals, higher production costs, and the upcoming Chinese New Year (Lunar) holidays, which traditionally disrupt supply chains.

India’s Growing Demand Sparks Market Activity

• Supply remains constrained as many importers reduced their volumes during October and November 2024. However, these limited imports had a minimal impact on the market due to weak downstream demand from sectors such as Ethyl Acetate, Butyl Acetate, N-Propyl Acetate, and Acetic Anhydride.
• Producers of Acetic Acid are facing conversion losses, with feedstock Methanol prices currently exceeding Acetic Acid prices. 
• A price spread of $55-$60 per ton is typically required for manufacturers to remain profitable. 
• According to a prominent importer, a price rebound for Acetic Acid seems likely, supported by historical trends showing a narrowing spread between Methanol and Acetic Acid. 
• Notably, two Chinese Acetic Acid producers suspended operations this week due to unfavorable conversion economics.
• On the brighter side, downstream demand from the Dyes and Pigments, PTA, and Amines segments showed slight improvement in December 2024 and is expected to remain steady through February 2025.
• India’s Acetic Acid demand has grown significantly this year, increasing by 26%. This growth is primarily driven by the commissioning of a new VAM plant by a leading paint manufacturer and Accordd Organics Pvt Ltd’s tenfold expansion of Ethyl Acetate production capacity. 
• The company has also introduced new products, including N-Propyl Acetate and N-Butyl Acetate. India’s total Acetic Acid demand is now estimated at 157 kt per month.

Chemical Market News: Supply Shortages Due to Production Shutdown

• In international markets, upstream crude oil prices (WTI) dipped by 0.72%, settling at $70.20 per barrel, while natural gas prices increased by 0.58% to $3.23/MMBtu.
• Feedstock Methanol CFR China prices are reported at $297/MT, while downstream FOB China Acetic Acid prices increased nearly 15$ at $330/MT.

Plant News: Inventory Building Advised Before Lunar Holidays

• Shanghai Huayi Chemical, a major Acetic Acid producer in Wuwei, Anhui, China, shut down its plant on December 16, 2024. The facility has an annual production capacity of 500 kt.
• Similarly, Yangtze River Acetyl Corp (Yaraco), based in Chongqing, China, announced the shutdown of its plant on December 15, 2024. This plant also has a production capacity of 500 kt per annum.

Expert Opinion: Upstream Costs and Supply Chain Challenges

• Market experts predict that Acetic Acid prices will rebound in the coming week due to a surge in downstream demand . The increased replacement costs are likely to keep prices high. 
• In addition, potential supply shortages in January and February 2025 during the lunar new holidays in China could drive prices upward. Buyers are advised to take advantage of current lower prices and build inventories strategically.