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Global acrylonitrile markets' slide continues on weak demand

Houston — Spot acrylonitrile prices around the globe continued on their downward trek this week on the back of declining demand from downstream acrylic fibers and acrylonitrile-butadiene-styrene markets, sources said.

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Since the beginning of October, global ACN prices have dropped around $200/mt, with Europe seeing the most significant decline, S&P Global Platts data show.

The spot European price was last assessed at $1,850/mt CIF ARA Tuesday, down $280 month on month, while the CFR Far East Asia and the FOB USG markers fell $135 and $220 month on month to $2,000/mt and $2,000-$2,010/mt this week, respectively, the data showed.

In the US, spot export ACN pricing reached and held at a 2018 peak of $2,160/mt FOB USG from September 11 through September 25, but has since fallen $155/mt or 7.2% to a Tuesday assessment of $2,005/mt FOB USG.

The US marker now sits at its lowest point in five months, with a June 5, assessment of $1,990-$2,010/mt FOB USG the last time spot pricing was any lower, according to Platts data.

SUPPLY TIGHTNESS WANES AS COSTS RISE

After a tight third-quarter this year, sentiment in Europe turned bearish as consumption continued to shrink, with the bulk of ACN derivatives unable to pass on higher feedstock costs to their clients.

Acrylic fiber consumers in particular have been struggling to afford ACN, which saw them choosing to cut run rates.

Turkey-based AKSA, the world's largest acrylic fiber producer, cut its run rates by 40% at end of September, meaning a 12,000 mt drop in ACN consumption a month, a source close to the company told Platts.

In southern Europe, another fiber producer halted production earlier this year, several sources said.

The overall operating rate of the acrylic fiber industry in China has slid to less than 60%, a producer said.

There is currently a wide spread of more than $100/mt between buying and selling ideas in Asia, with limited spot deals closing.

In another derivative, ABS, European producers have faced pressure from competitive imports.

"There are competitive offers from Asia for shipment in November to arrive in December," a distributor said.

Demand for European-origin product on a spot basis has been thin while contract basis deliveries were said to be balanced.

"Demand is balanced for contract business, but a bit slow for monthly spot deals, with a hand-to-mouth effect as long as the ABS price level is expected to continue to decrease," the distributor said.

"Customers remain reluctant to buy more than they really need for the month," a producer said.

ABS SECTOR SEES PRICING DECLINE

Platts assessed the ABS spot price at Eur1,690/mt ($1,930/mt) FD NWE Wednesday, down Eur60/mt month on month, reflecting a slide in feedstock costs.

Elsewhere, Asian ABS prices tumbled to a two-year low of $1,550/mt CFR China and 17-month low of $1,600/mt CFR Southeast Asia Wednesday.

The drastic and continuing fall in feedstock styrene prices and rising trade tensions between the US and China led to weaker sentiment in the ABS market.

According to sources, producers were open to negotiations and deals are expected to conclude at much lower levels. Margins are weak, with offer levels falling below the cost of production, said a producer.

Demand remains weak even though prices have fallen. End-users are reluctant to stock up on inventory given the free fall in prices and there are ample prompt cargoes around.

"Weaker prices are causing the market to panic. Buying interest will increase if market prices become more stable," a market participant said. Despite the significant drop in ACN prices, several sources said the trend was only temporary.

In 2019, market participants said global prices are likely to strengthen again amid expectations of higher demand from ABS and other derivatives like acrylamide.

There is some belief in the US that current market dynamics are indicative of a ACN market "bear trap" that will precede a demand-fueled surge in ACN pricing early next year, a source said.

"Buyers who sit on the sidelines hoping for a big move down might be very disappointed when trying to claim material" in the first quarter of 2019, the source added.

--Phillipe Craig, phillipe.craig@spglobal.com

--Lara Berton, lara.berton@spglobal.com

--Olu Shaw, olu.shaw@spglobal.com

--Huijingregina Sher, regina.sher@spglobal.com

--Miranda Zhang, miranda.zhang@spglobal.com

--Edited by Keiron Greenhalgh, keiron.greenhalgh@spglobal.com