Supply Suffers Loom as Chinese New Year Nears: Acetic Acid Prices on the Rise

Key Highlights:

• Price Updates: Domestic Acetic Acid prices increased by ₹1.5/kg, while imports range from ₹39 to ₹41/kg, influenced by rising replacement costs and USD/INR fluctuations.
• Supply Tightness: Chinese plant shutdowns and Lunar New Year holidays are limiting global supply, with contract renewals adding further constraints.
• Demand Growth: India’s demand grew 26% in 2024, fueled by new VAM and Ethyl Acetate production facilities, and is expected to stay robust through early 2025.
• Expert Insights: Price rebounds are anticipated due to supply shortages and strong downstream demand. Buyers should consider building inventories strategically.

Acetic Acid Prices See Upward Trend in Domestic and Global Markets

• In the domestic market, Acetic Acid prices witnessed an increase of ₹1.5/kg today.
• Imported Acetic Acid is being offered at ₹39.00++ per kg (Ex-Kandla) and ₹39.50++ per kg (Ex-Mumbai) on 60-day payment terms. 
• Trader quotations are slightly higher, at ₹40.00++ per kg (Ex-Kandla) and ₹41.00++ per kg (Ex-Mumbai) under similar payment conditions.
• Most importers are holding back offers, anticipating further price escalations. 
• The higher USD/INR exchange rate, which stands at ₹85.17 today, is adding to the import conversion costs.
• Additionally, a surge in FOB China Acetic Acid prices is pushing up replacement costs. 
• Futures contracts for January and February shipments are indicating a higher price range, driven by annual contract renewals, elevated production costs, and the upcoming Chinese Lunar New Year holidays, which are known to disrupt supply chains.

Chemical Supply Constraints Expected to Tighten in Early 2025

• Supply constraints persist for December and January due to ongoing contract renewals and the anticipated slowdown during the Chinese Lunar New Year holidays, which are likely to limit Acetic Acid availability.
• The domestic market is concerned about limited imports. Producers of Acetic Acid are also facing conversion losses as the price spread between Methanol feedstock and Acetic Acid has narrowed significantly. 
• For profitability, manufacturers typically require a price spread of $55–$60 per tonne. A prominent importer highlighted that the current situation could lead to a strong price rebound, supported by historical trends where similar narrowing spreads have triggered price surges. Notably, two Chinese Acetic Acid producers have suspended operations this week due to unfavorable economics.
• On a positive note, downstream demand from Ethyl Acetate, N-Propyl Acetate, and N-Butyl Acetate has picked up in December. Although segments such as Dyes and Pigments, PTA, Bulk Drugs, and Amines showed slight weakness, their demand improved compared to November 2024 and is expected to remain steady through February 2025.
• India’s Acetic Acid demand has grown by a remarkable 26% this year, driven by the commissioning of a new VAM plant by a leading paint manufacturer and the tenfold expansion of Ethyl Acetate production capacity by Accordd Organics Pvt Ltd. The company has also launched new products such as N-Propyl Acetate and N-Butyl Acetate. The country’s total Acetic Acid demand is now estimated at 157 kt per month.

Market News: Plant Shutdowns in China Add Pressure to Global Supply

• In global markets, upstream crude oil prices (WTI) declined 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 climbed by nearly $15 to $330/MT.
• China’s November styrene imports, and exports fall 26 Dec 2024, China’s exports tumbled to 403 metric tons in November, from 857 metric tons in October.

Chemical Plant News

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

Expert Opinion: Price Rebound Likely, Inventory Build-Up Recommended

• Market experts forecast a rebound in Acetic Acid prices in the coming week, driven by rising downstream demand and increased replacement costs. 
• Supply shortages during January and February 2025, exacerbated by the Chinese Lunar New Year holidays, are also expected to support higher prices. 
• Buyers are advised to capitalize on the current lower prices and strategically build inventories.