When will the price of acetonitrile drop?

According to the latest analysis report by Anxin Securities, the price of acetonitrile rose sharply against the trend: while most chemical products saw a significant drop in price during the second half of 2008 due to the financial crisis, the price of acetonitrile increased instead. It rose from 20,000 yuan per ton in the middle of 2008 to 60,000 yuan per ton by the end of that year, and more recently it has surged rapidly from 60,000 yuan per ton to 120,000 yuan per ton. The report predicts that rising prices for acetonitrile may continue until the end of 2009. The report suggests that the global reduction in acrylonitrile production is the main reason for the tight supply of acetonitrile: acetonitrile is a by-product obtained from the treatment of acrylonitrile wastewater, while acrylonitrile itself is a key raw material for acrylic fibers and ABS resin. The demand for acrylonitrile for its main downstream product, acrylic fibers, is growing slowly, and world production capacity of acrylonitrile declined from 6.4 million tons per year in 2002 to 5.866 million tons per year in 2007. The financial crisis in 2008 led to a significant reduction in the production of acrylonitrile abroad, causing problems with the supply of raw materials for acetonitrile. 71% of acetonitrile is used in the pharmaceutical industry, 10% in the pesticide industry, with the rest mainly used as solvents and reagents. Currently, the demand for acetonitrile in the pharmaceutical and pesticide industries remains stable, resulting in a shortage between supply and demand for this substance, which has led to a sharp increase in its price. The report predicts that rising prices for acetonitrile are likely to persist until the end of 2009. Given the difficult economic recovery in developed economies such as the United States, Western Europe, and Japan (which together account for over 60% of the world’s acrylonitrile production capacity), it will be hard for these countries to restore their acrylonitrile production levels to those before the crisis. China’s acetonitrile production also declined from 25,000 tons in 2007 to 19,000 tons in 2008. In 2007, the global total consumption of acetonitrile was between 70,000 and 75,000 tons, and it will be difficult to restore production levels at short notice. We expect high acetonitrile prices to persist until the end of 2009. The report indicates that the main companies among those listed on the stock market with acetonitrile production capacity are Daqing Huake and Shanghai Petrochemical. Daqing Huake has a production capacity of 3,000 tons, while Shanghai Petrochemical has a capacity of 4,000 tons. Due to market-based pricing of raw materials, Daqing Huake’s total cost is 40,000 yuan per ton, whereas Shanghai Petrochemical, thanks to internal settlement mechanisms, has a total cost of 8,000 yuan per ton. If Daqing Huake’s other chemical-related businesses do not incur losses and the production of acetonitrile reaches 2,000 tons, it will contribute around 0.94 yuan per share to EPS. Shanghai Petrochemical currently has an acrylonitrile production capacity of 130,000 tons. Assuming an average annual operating rate of 70%, it can generate a net profit of around 500 million yuan per year. With a total share capital of 7.2 billion yuan, this will result in an increase in EPS of approximately 0.07 yuan. However, the report also indicates that as the price of acetonitrile soars, the operation of acrylonitrile plants may resume; meanwhile, facilities for producing acetonitrile are scheduled to come online by the end of 2009, and the price of acetonitrile will gradually return to more reasonable levels.

Due to the high profits associated with acetonitrile in the past, many projects for producing synthetic acetonitrile on a scale of dozens or hundreds of tons are now being launched; there are even those claiming to have a production capacity of 30,000 tons； As the economy recovers, acrylonitrile manufacturers that had severe production capacity shortages earlier will resume operations ； At the same time, due to the high price of acetonitrile in the earlier period, downstream companies either reduced production or turned to alternatives, resulting in weak demand. Therefore, a rational return of acetonitrile prices is an inevitable trend.

According to information I have gathered from downstream users of acetonitrile, the current ex-plant price from petrochemical companies is around 20,000 (excluding shipping costs).

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