Market and product

Asia’s adipic acid (ADA) spot prices rose to a 17-month high and may continue rising near term amid limited supply from China, which is a key seller in the region, industry sources said on Friday.

For the week ended 16 November, spot prices for China-origin cargoes closed at $1,100-1,150/tonne CFR (cost and freight) NE Asia; while those for other cargoes stood at $1,200-1,300/tonne CFR NE Asia. These prices were last seen in mid-July 2015, according to ICIS data.

Major Chinese producers have been raising their offers amid the snug domestic supply, low inventory and rising feedstock cost. They said they had to push up prices further to recoup losses incurred in the past few months.

“We could not afford to lose money for the whole of the year, so we have to do something. Now our inventory is very low, so we should take this chance to hike prices,” a major Chinese producer said.

Supply availability in China tightened from October after several producers cut operation rates at their plants in a bid to boost prices, market sources said.

A major Chinese producer in southwest China has lowered the run rate at its ADA plant from 100% in November due to a disruption in feedstock supply. It was not clear when the producer will resume full production at its plant, market sources said.

Meanwhile, deep-sea cargoes flowing into Asia were few given tight supply in Europe, thus, allowing producers in this region to maintain firm prices.

On the demand side, most downstream buyers and end-users said they could not pass on the rising feedstock cost to their customers due to sluggish year-end demand. Most of them have retreated to the sidelines and were waiting for prices to ease down to acceptable levels.

“The ADA prices are too high, and they are keeping going up from early this year. We could not pass on to our customers as the downstream sales do not improve much this year,” a Taiwanese buyer said.

But the price uptrend looks set to continue, backed by an expected pick-up in pre-holiday restocking activities in December while supply is limited, most market participants said.

Some buyers may start building stocks next month ahead of the Lunar New Year holiday in China on 28 January-2 February 2017, they said. - ICIS