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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: 878. Since the beginning of this year, the AO acid AN market has shown strong performance; although prices have sometimes dropped by 50–80 yuan per ton, the average price has remained above 2300 yuan, representing an increase of around 18.5% compared to the same period last year. “Reduced supply of raw materials and strong demand from downstream sectors have driven up the price of *ao acid an in the market. However, falling prices of raw materials 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. In addition, *ao acid an is also used in small quantities in fields such as refrigerants, nitrogen oxide absorbents, and chromatographic analysis reagents, accounting for only 2% to 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 chemical 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 numerous challenges this year. However, thanks to the relatively stable markets established in Australia, New Zealand, Southeast Asia and other regions, as well as the ongoing expansion of export areas, 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., phthalic acid is considered a hazardous substance. 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, the industry producing *ao acid has been increasing its efforts to eliminate outdated production capacity; over 2 million tons per year of such capacity has been phased out, and the current production capacity for *ao acid is now lower than it was in 2015. ”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. Fall in raw material prices \"In 2008, driven by 4 trillion yuan worth of investment, the price of *ao acid an rose sharply from 1,500 yuan to 3,000 yuan. This year, with continued strong investment in infrastructure, the price of *ao acid an is unlikely to reach 3,000 yuan again, mainly because falling prices of raw materials such as nitric acid and liquid ammonia are having a negative impact.\" ”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; by late May, the average price had dropped to 1,433 yuan, representing a decline of over 10% on average, with a drop of 14% compared to the same period last year. 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, influenced by factors such as high production rates among enterprises and falling prices of raw coal, liquid ammonia prices have been on a downward trend recently, dropping by 100 to 230 yuan compared to the beginning of May. Currently, the price of liquid ammonia in areas with low prices is around 2,100 yuan. Meng Hong believes that this year, the prices of raw materials such as nitric acid and liquid ammonia have declined 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; at the same time, a sharp increase is also unlikely.