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The Acetic Acid Market: Extreme Contrasts in the \"Golden September and Silver October\" Period Author/Source: Sinochem New Network Date: 2021-10-20 Clicks: 64 This year’s \"Golden September\" brought many surprises to the acetic acid market, with prices reaching 9,000 yuan per ton, setting a new historical high. However, with the end of the long \"Silver Ten\" holiday period, the market trend changed drastically (the bears took control), and prices continued to decline; in some areas, the low-end prices dropped to around 8,100. Industry experts believe that, given the imbalance between supply and demand, there is still room for a significant drop in the price of acetic acid in the coming period, which stands in sharp contrast to the trend observed during the \"Golden September\" period. The tightening supply situation gradually eased. In September, the significant price increase in the acetic acid market was driven by tight supply, but by October, this tightening supply situation began to ease. Last month, due to the dual controls on energy consumption, the production capacity of acetic acid and related factories in Shandong region decreased. Thereafter, the acetic acid production facilities in Jiangsu reduced their output, while those in North China and Northwest China were under maintenance. Shaanxi Yanchang suspended shipments due to the impact of the National Games, which led to a continuous shortage of supply in the domestic acetic acid market starting in mid-September. According to statistics, acetic acid plants with a combined annual production capacity of 3.45 million tons have been affected, accounting for 36.32% of China’s total acetic acid production. Entering October, acetic acid production facilities such as Jiangsu Sopu, Tianjin Alkali Plant, and Ningxia Great Wall gradually resumed normal operation. The on-hand supply in the domestic acetic acid market is gradually increasing. According to statistics, the operating rate of the acetic acid industry has risen from 77.74% in September to 90% at present, reaching its highest level since the beginning of the year. Xu Na, an analyst at Jinchuang, said that the average domestic social inventory of acetic acid in September was 80,200 tons, a decrease of 24.69% compared to August. Entering October, as the operating rate of the acetic acid industry increased, inventories of manufacturing companies gradually built up, now exceeding 120,000 tons, resulting in a saturation of available spot supply in the market. Looking ahead, Anhui Huayi’s acetic acid production facility will continue to operate at reduced capacity. The SOP plant is scheduled to shut down for maintenance in November, but planned maintenance activities are usually prepared in advance, so their impact on the market is relatively limited. Industry experts say that the oversupply in the acetic acid market in the short term is unlikely to ease, and prices still have room to fall. The strong support from costs is weakening. Methanol, which is a raw material for acetic acid, has seen a sharp rise in price in the market since September. Rising prices of thermal coal have driven methanol production costs to record highs. Methanol prices in various regions have exceeded 4,000 yuan, with some areas even reaching around 4,600 yuan, setting new historical highs. Taking the methanol market in the main production areas of the northwest as an example, the dual controls on energy consumption remain in place; as a result, many methanol production facilities in the northwest region, especially in Shaanxi, continue to operate at reduced capacity or are shut down. Before and during the National Day holiday, overall inventory levels were not high in the upstream sector; as a result, after the holiday, driven by rising prices of coal and natural gas, the local methanol market saw a sharp increase in prices, with these prices reaching highs not seen in several years. Currently, the operating rate of the methanol industry has risen slightly by 2.29 percentage points compared to before the National Day holiday, but it is down by 9.26 percentage points compared to the same period last year. Furthermore, the recovery on the demand side has fallen short of expectations. The operating capacity of methanol-to-olefins plants is around 60%, down by about 15 percentage points from the beginning of September. This alone resulted in a reduction in methanol demand of about 157,000 tons. Local power shortages will persist in the later period, and some downstream industries may still face shutdowns or reduced operations. It is expected that the methanol market will remain at high levels in the short term, which will not provide strong support for acetic acid in terms of costs. Optimism regarding downstream demand proves unfounded. Looking at the downstream demand for acetic acid, the market performance during the \"Golden September\" period fell short of expectations, with production rates declining to varying degrees compared to August. Among them, the operating rate of purified terephthalic acid (PTA) declined by 2.64%, that of ethyl acetate by 15.41%, that of butyl acetate by 9.65%, and that of acetic anhydride by 6.39%. However, the overall decline was less pronounced than that of acetic acid in the upstream sector, resulting in a continued tight supply of raw materials. Industry insiders place their hopes on a recovery in demand during the \"Silver October\" period. Previously, the industry predicted that manufacturers that ceased production of ethyl acetate and butyl acetate in September would gradually resume operations in October, and the industry’s capacity utilization rate was expected to return to a reasonable level. After National Day, the weekly demand for acetic acid from the plants that produce butyl acetate and ethyl acetate increased by 13,500 tons; as a result, great expectations are placed on the acetic acid market during this period. “In fact, the resumption of operations in the main downstream industries using acetic acid in China after the National Day holiday did not reach the expected level. Among them, the load of the ethyl acetate plant remains at the previous level only ； The load on butyl acetate production facilities is low, but market supply is already saturated; therefore, there is little room for an increase in industry operational capacity in the short term ； Affected by power rationing in Zhejiang, the operating rate of the PTA industry continued to decline in October. Furthermore, downstream buyers are cautious about purchasing acetic acid, and the impact of power restrictions persists; on the demand side, there is no inclination to stockpile raw materials, with purchases being made mainly as needed. Trading remains sluggish, and large-scale orders are rare. As a result, the supporting effect on the acetic acid market will continue to weaken, putting pressure on acetic acid prices to stay low. ” Analyst Zhong Mengyao from Longzhong Information analyzed.