*The AO acid market is caught between rises and falls

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*The AO acid AN market faces difficulties in terms of price fluctuations Author/Source: Sinochem New Network Date: 2020-06-01 Clicks: 8 This year, the market for AO acid AN has shown strong performance; although prices have sometimes dropped by 50–80 yuan per ton, the average price has remained above 2,300 yuan, representing an increase of around 18.5% compared to the same period last year. 　　“A decrease in supply and strong demand from downstream sectors have driven up the price of *ao acid an market, but falling raw material prices fail to provide support at the cost level. It is expected that the *ao acid an market will remain volatile at high levels in the short term, with fluctuations in both directions possible. ”Several industry insiders believe. 　　Strong downstream demand The demand for *ao acid an comes from three main sources: first, it is used as a raw material in the civil explosive industry, accounting for 64% of the total consumption of *ao acid an; second, it is modified or processed into compound fertilizers, accounting for around 26% of total consumption; third, it is exported, accounting for 6% to 8% of total consumption. Additionally, *ao acid an is also used in small quantities in areas such as refrigerants, nitrogen oxide absorbents, and reagents for chromatographic analysis; its share accounts for only 2%–4%. 　　Meng Hong, general manager of Guangzhou Yuanhong Chemical Co., Ltd., said that in order to counter the impact of the COVID-19 pandemic on the economy, various regions in China have increased investment in infrastructure this year, issuing bonds to raise funds for projects such as railways, highways, airports, urban development, and water management. According to statistics, the total investment scale for key projects announced recently in 11 provinces and municipalities including Yunnan, Sichuan, and Fujian amounts to approximately 25 trillion yuan, of which 5.57 trillion yuan is planned to be invested in 2020. “The expansion of infrastructure construction is expected to increase the demand for civil explosive products, which in turn will drive the *ao acid an market as well. ”Meng Hong said. 　　In the agricultural sector, *ao acid is mainly used in the production of nitro fertilizers. Nitrogen-based fertilizers are safe and reliable, easy to use, environmentally friendly, and high in nutrient content. They retain the basic properties of traditional organic acids, contain essential nutrients such as nitrogen, phosphorus, and potassium required for plant growth, offer a balanced nutrient profile with high levels of active ingredients, and can meet the demands of the traditional fertilizer market. In recent years, nitrofertilizers have developed rapidly, and the demand for *ao acid an has also been increasing. 　　In terms of export performance, many companies have increased their exports of *ao acid this year. In April, after learning of the Australian clients’ demand for 6,500 tons of phosgene, Shanxi Tianji Group secured the largest export order for phosgene in China this year, thanks to its reliable product quality and excellent service. 　　“Affected by the COVID-19 pandemic, China’s exports of *ao acid an will face many difficulties this year. However, thanks to the relatively stable markets established in Australia, New Zealand, Southeast Asia and other places, as well as the ongoing expansion of export regions, the average monthly export volume is expected to remain between 10,000 and 15,000 tons in the coming months. If the international pandemic can be brought under control, export conditions are expected to be significantly better in the second half of the year than in the first half, which could help drive up the prices in the *ao acid an market. ”Meng Hong analyzed. 　　Capacity is continuously declining. According to Xiao Yi, the head of the marketing department at Hunan Minghui Chemical Co., Ltd., *ao acid an is considered a hazardous **material. In recent years, strict approval processes and oversight have been implemented for new construction, renovation, and expansion projects related to *ao acid an, as well as for its sales, storage, and distribution. As a result, this industry has not experienced excessive capacity surplus due to continuous expansion, unlike other chemical industries. By the end of 2018, the national production capacity of *ao acid an was 10.88 million tons, a decrease of 3.1% compared to the previous year; in 2019, this capacity further dropped to around 10 million tons. 　　“In recent years, efforts to phase out outdated production capacity in the *ao acid an industry have been intensifying. More than 2 million tons per year of production capacity has been withdrawn from the market; currently, the total production capacity for *ao acid an is below the 2015 level. ”Xiao Yi said. As production capacity declines, the operating rate of China’s phthalic acid industry has been only 60% this year, with monthly production amounting to around 500,000 tons; growth in production is also limited. All these factors are likely to provide support for the phthalic acid market. 　　Raw material prices have declined. “In 2008, driven by 4 trillion yuan in investments, the price of *ao acid an rose sharply from 1,500 yuan to 3,000 yuan. This year, although infrastructure investment remains robust, it is unlikely that the price of *ao acid an will reach 3,000 yuan. The main reason is that declining prices of raw materials such as nitric acid and liquid ammonia are holding it back.” ”Meng Hong said. 　　Looking at the nitric acid market, at the beginning of March, the price of nitric acid was generally above 1,600 yuan, reaching as high as 2,100 yuan in some cases. By late May, the average price had dropped to 1,433 yuan, representing a decline of over 10% on average; compared with the same period last year, the drop was 14%. Industry analysts believe that the decline in nitric acid prices is mainly due to an ample supply in the market, coupled with weak demand from downstream industries such as TDI, MDI, aniline, and ***; this imbalance between supply and demand has led to the price drop. 　　In the liquid ammonia market, driven by factors such as high operating rates among enterprises and declining raw coal prices, liquid ammonia prices have recently been trending downward, falling by 100–230 yuan compared to early May. Currently, the price of liquid ammonia in the low-price range is around 2,100 yuan. 　　Meng Hong believes that this year, the prices of raw materials such as nitric acid and liquid ammonia have fallen to varying degrees, putting pressure on the *ao acid an market. However, given the strong demand from downstream sectors and limited production growth, it is expected that there will be little room for a significant drop in the market price of *ao acid an in the short term; meanwhile, a sharp increase is also unlikely.