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SubjectAcrylic World Newsletter - May 2024
Published Date2024/5/1
Content

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MARKET OVERVIEW  

In Asia, the increase in China’s MMA prices by RMB 2,000~3,000 at the end April has led to a corresponding upward trend in MMA prices by US$150~200 pmt in May. This surge is also driven by shifts in demand-supply dynamics, hikes in raw material costs, geopolitical influences, and regulatory changes affecting production or distribution. MMA producers find themselves compelled to raise MMA prices while allocating MMA quantities to regular customers since March, attributing high acetone and MTBE prices, which in turn affected MMA operating rates, causing a decline to unprecedented levels. Consequently, the overall market supply of MMA remained constrained. Most MMA markers limited their transactions as lean MMA inventories, opting to replenish their stock. However, most buyers scaled back their purchases of MMA, adopting a cautious "wait and see" approach. Actual trade remains largely subdued, as market participants struggled to reach common ground amid a persistent gap between buying and selling indications. In the downstream sectors, MMA derivatives are seeing weak demand and most export opportunities are no longer viable. Nevertheless, MMA buying will remain cautious, aligning their strategies with not rushing to procure and anticipating a decrease in demand from Europe and the U.S. after June owing to the upcoming summer season holidays. 

Additionally, the global shipping crises are following:

1. The Panama Canal in the Western Hemisphere is suffering from drought, resulting in a significant reduction in traffic volume.

2. The Suez Canal in the Eastern Hemisphere is threatened by the armed forces of the Yemeni rebel youth movement.

3. The Kaye Bridge is broken in Baltimore, the ninth-largest port in the United States and the largest automobile port in the country. In 2023, it handled up to 52.3 million tons of foreign cargo with a total value of US$80 billion, including nearly 850k cars and trucks.

Moreover, Chile's "Three O'Clocks" and Emol News Network reported on fourth of April that approximately 6,000 workers in 26 ports across Chile initiated a strike because the government failed to meet its labor and safety commitments. This action has raised significant concerns across various sectors, impacting the major ports of San Antonio and Valparaiso. Additionally, union workers at major Italian ports, including Genoa, La Spezia, Livorno, Trieste and Venezia, conducted continuous strikes from 3rd ~5th of April. These strikes were organized to demand higher wages and improved working standards, leading to planned shutdowns and protests of varying degrees across Italy. In the outlook for June, the surge in MMA demand from the USA, rising prices in China and inventory challenges faced by many MMA producers are resulting in market that remains balanced to tight, with prices hovering at similar levels.

FEEDSTOCK

On the feedstock side, the oil market hovered on high, thereby contributing to OPEC+ extending voluntary cuts into the second quarter of this year. Geopolitical tensions escalated following a Ukrainian drone attack targeting Russian’s largest refinery at Rosneft, resulting in an estimated reduction of 400k barrels per day in refinery operations for April. Iran's retaliatory attack on Israel further impacted the global sea and air passenger and cargo industries. The Iranian Revolutionary Guards seized an Israeli-related cargo ship in the Strait of Hormuz on 13th of April, following Tehran's warnings of retaliation for Israel's actions in Syria. Shipping navigation in the Persian Gulf and the Indian Ocean's Strait of Hormuz has become a significant concern since the Red Sea crisis and the Suez Canal blockage. According to the Shanghai Container Freight Index, the freight rate per 20-foot container on the Persian Gulf (Dubai) route surged by over 8% on a week-to-week basis, exceeding the US$2,000 mark and marking a cumulative increase of nearly 30% since February. Data suggests that ships passing through the Strait of Hormuz mainly comprise oil tankers (61.9%), bulk carriers (17%), container ships (15%), and roll-on/roll-off (ro-ro) ships (1.8%). Consequently, oil prices have fluctuated between US$83 and US$88 per barrel (with ICE Brent Crude Oil prices at US$88.4/bbl and WIT Crude Oil prices at US$82.63/bbl on 30th of April). Inversely, concerns about the market demand persist as the escalating Middle East conflict weighs on fears of supply disruption, and the Russia’s invasion of Ukraine/ Israel-Hamas conflict remain unresolved. Additionally, the U.S. has decided to reimpose sanctions on Venezuela after a six-month hiatus, citing the Maduro government’s failure to conduct a fair election. This action puts 150k barrels per day of heavy crude at risk in a market already facing shortages of heavy crude, exacerbated by a reduction in Mexico’s crude exports. Turing to the MMA feedstock side, the convergence between rising crude oil prices and the modest drop in naphtha prices highlights the persistent oversupply and fluctuating demand dynamics affecting the naphtha market. The naphtha prices slightly decreased to the range of US$680~720 pmt. The Asian spot ethylene values have stabilized at US$900-940 pmt CFR. MTBE prices remain stable in the range of US$940~990 pmt CFR Asia. In Southeast Asia, spot propylene market sentiment remains flat despite bullish energy and feedstock prices. There is resistance to further prices increase given the poor downstream demand, especially for polypropylene(PP) affordability. The spot propylene values in Asia have nonetheless stabilized at US$850-870 pmt CFR Taiwan. The tight supply of acetone has boosted the price to US$950~1,000 pmt CFR China, elevating spot acetone costs and weighing on MMA production. The methanol prices have stabilized at US$320~350 pmt CFR Taiwan. The high cost of raw materials, especially acetone prices, has prompted most producers to implement minor reductions. This adjustment comes amidst a relatively limited availability of MMA in the spot market and elevated production expenses.

PRODUCTION

In Europe, downstream demand continues struggling, leading to wider macroeconomic difficulties, and imported materials continue to be restricted.  It’s been learned that several MMA plants are still planning to reduced their production rates. Spot MMA prices levels are now typically sitting at or above levels for contractual sales. As a result, most buyers are seeking to maximize their contract offtakes, considering the Red Sea crisis delaying vessels or leading to longer lead times. Consequently, there are reports that Europe’s MMA contract and spot prices increased by EUR 200~300/mt in April. Furthermore, the ACEA indicates that EU passenger car registration decreased by 5.2% year-on-year in March. The fall is primarily attributed to reduced activity because of the Easter holiday. The association further reports that Germany posted the biggest decline, with -6.2%, followed by Spain -4.7%, Italy -3.7% and France -1.5%. In the US, most MMA maker are suffering from lower acrylonitrile (AN) running rates, resulting in less hydrogen cyanide (HCN) available in Q1. However, It’s been heard that INEOS Nitriles 545kpta acrylonitrile(AN) plant in the Green Lake, Texas confirmed completion of cleaning in mid-April and is running again. Subsequently, the INEOS Nitriles 190kpta acrylonitrile (AN) plant in Lima, Ohio, is running as per usual. Cornerstone confirmed that its Fortier, Louisiana 240kpta acrylonitrile plant is running following a March planned maintenance. The plant started at the beginning of April. As a result, the average of acrylonitrile (AN)operating rate was estimated to be 60~65% in April, up from 45~50% last month. MMA production is estimated to increase in May, with hopes of alleviating the tight situation in Q2. Additionally, reports indicate that OQ Chemicals has achieved mechanical completion on infrastructure for high-purity propionaldehyde, a precursor for MMA production, at RÖHM’s world-scale facility under development in Bay city, Texas. In Asia, the run rates for acrylonitrile (AN) plants in South Korea, Taiwan and Thailand averaged at 70~80%. It’s been heard that South Korea’s Lotte MCC MMA plant No. 1 unit plans to shut down for maintenance in late May. In China, the overall operating rate for acrylonitrile (AN) has dropped to just above 60%, marking the lowest point seen in the past few years on the back of the feedstocks, domestic propylene prices remained range-bounded in a narrow window, with ammonia prices gradually trended downward, resulting in a slight reduction in average feedstock costs in April. Additionally, the prices increase observed in recent months were primarily driven by the temporary supply shortages, rather than demand recovery. The acrylonitrile market is expected to remain oversupplied if all plants can operate normally, and downstream demand has yet catch up. However, unplanned outages among different plants have introduced some uncertainty into the regional market. As a result, the operating rates for MMA continued to be extremely low, and a structural return to more normal operating rate levels is not expected in the coming months, especially considering the significant negative impact of elevated acetone costs. It’s been heard that Zhejian PC 520kpta acrylonitrile (AN) plant, remains offline due to technical issue, leading to planned shut down for associated MMA plant. It’s said that Liaoning Kingfa 260kpta acrylonitrile (AN) plants has postponed its restart until early May, in line with the MMA plant shut down. It’s been heard that PetroChina Jilin (Jeiyang) 130kpta acrylonitrile (AN) plant planned to shut down since mid-March, while CNOOC Dongfang 200kpta acrylonitrile (AN) plant was off-stream for planned maintenance in April, resulting in corresponding production cuts or shut down for their MMA plants. Furthermore, Jiangsu Jiankun Chemical 150kpta MMA pant in Jiangsu, plans to shut down for maintenance on 25th of April. It’s said that Zibo Qixiang Tengda chemical co., Ltd 200kpta MMA plant in Zibo, Dongming Huayi Jade Emperor New Materials Co., Ltd. 50kpta MMA plant in Shang Dong are still under plans to shut down. Additionally, it’s been heard that RÖHM Shanghai's MMA factory has been utilized for internal purposes and allocated to regular customers since February. Overall, MMA inventories have been depleted, with operating rates remaining at a low level of approximately 50~60%.

DOWNSTREAM

On the PMMA side, market prices for polymethyl methacrylate (PMMA) in Asia continues to be buoyed by further hikes in yuan-denominated MMA prices. PMMA supply remains constrained due to low production rates amid a crunch in feedstock MMA supply. Additionally, fading prospects of US interest rate cuts this year and weaker economic data from China and Europe also dampened the demand outlook, leading buyers to grow increasingly cautious amid relentless price hikes and seasonal factors impacting trade activity. The spot prices for general-purpose (GP) PMMA in Southeast Asia show a tendency to increase, reflecting limited supply appetite. As the result, prices have risen by US$100~150/mt to reach US$2,150-2,300/mt CFR SE Asia. In China, market demand remains sluggish. However, upstream methyl methacrylate (MMA) prices continue to surge to CNY 16,000 ~ 17,000mt owing to tight MMA supply and increased exports between March and April. This, combined with PMMA posting higher offers, has led to PMMA prices increasing to Chinese yuan (CNY) 17,000/mt ~ 18,500/mt EXWH for locally sourced material, with some discussions observed at (CNY) 18,500/mt ~ 19,500/mt EXWH. The Nation Bureau of Statistics in mainland China has announced Q1 GDP growth at 5.3% year-on-year, which exceeded general market anticipation, indicating continued economic recovery compared to last year. In Taiwan and Korea, the domestic market remains healthy, prompting local MMA producers to announce a US$150~200/mt increase in MMA prices in May owing to a significant rise in export MMA prices.

On the acrylic sheet side, market demand appears stable following the “Muslim Ramadan” and “Songkran Water Festival”. However, MMA offtake has softened as cast sheet producers struggle to pass on the increased MMA costs and higher operation costs owing to lower running rate. Many customers are not rushing to purchase MMA on the back of sufficient stock availability, and cast sheet prices are weakening as a result. In Vietnam, domestic market demand has weakened due to uncertain economic outlook, leading all cast sheet factories to reduce their output. In Indonesia and Thailand, however, domestic sheet market demand appears healthy, and increased export demand from Europe and America has prompted cast sheet makers to run at full operational rates. In Taiwan, domestic market demand continues to be weak, prompting cast sheet makers to reduce their production rates. However, local MMA makers announced a NT$4/kg prices increase in May owing to tight MMA supply and increased acetone costs.

On the acrylic sheet side, the cast sheet prices ranged from US$2.8~3.10/kg CFR.

On the resin side and others, demand from ABS sector has remained subdued, with a few producers cutting output in April. This has led to an overall operating rate for ABS dropping to around 60% owing to rising feedstock costs. ABS prices have continued their upward trend as a result of decreased supply. Demand from the acrylamide sector has remained unchanged, with producers maintaining low operating rates to manage inventory levels. Acrylamide prices initially decreased but rebounded around end April. Overall demand from NBR sector has not been very supportive either, with NBR prices halting their upward trend and decreasing slightly in April. In India, MMA supply remains tight, and it’s been heard that discussions for bulk shipment are being held in the range of US$2,100~2,200/mt CIF India port. Additionally, the Asia Petrochemical Industry Conference (APIC) will be celebrated during 30th ~31st of May in Korea, aimed at sharing information, building cooperation, and advancing the development of petrochemical industry in Asia. 

Economic Impact:

Reports indicated that the disruptions caused by the Red Sea crisis could lead to a 0.7 percentage point increase to global core goods inflation and a 0.3 percentage point rise in overall core inflation during the first half of 2024. In response, the G7 nations have committed to collectively escalating economic on Iran. This involves proposing additional sanctions and measures to curb Iran’s military initiatives. Additionally, on 16th of April, the U.S. House overwhelmingly passed the Iran-China Energy Sanctions Act. This legislation aims to expand sanctions on Iran by mandating annual reviews to assess the involvement of Chinese financial institutions in transactions related to Iranian oil.

In summary, the tensions in the Red Sea are impacting vessel reroutes, fuel oil demand, and global trade, underscoring the need for resilience in supply chains and maritime operations.

MMA PRICE  

US$/mt       

May 2024 Price Range

April 2024 Price Range

Asia contract prices for cargos  200mt or more

1,900~1,990

1,760~1,850

Asia spot prices for 20~200mt

2,100~2,200

1,900~2,000

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