Glacial Acetic Acid Industry Monthly Report

Last month, the Glacial Acetic Acid market exhibited a "V"-shaped trend. Due to repeated geopolitical tensions and the blockade of the Taiwan Strait pushing methanol prices to high levels, the cost of glacial acetic acid remained high and volatile in the first ten days of the month. This gradually broke the pattern of simultaneous weakening supply and demand suppressing the market, with strong cost-driven factors taking their place.

Mid-month, as negotiations progressed and expectations for the resumption of air traffic increased, the geopolitical premium quickly cleared, and methanol futures and spot prices weakened significantly. Meanwhile, glacial acetic acid producers, facing continuously declining inventories and unexpected plant malfunctions coupled with slower-than-expected recovery from planned maintenance, gradually shifted towards their own supply and demand dynamics.

By the end of the month, costs continued to collapse, but glacial acetic acid producers' inventories hit a new low for the year. Coupled with the transition between old and new long-term contracts, traders had limited stock and mostly sold according to market conditions. Factories were actively pushing up prices, and the market followed suit.

In summary, both supply and demand for glacial acetic acid rose simultaneously, but significant inventory reduction by producers in the latter half of the month, coupled with industry expectations of maintenance shutdowns next month, led to a gradual shift in the market from being primarily driven by costs to being driven by its own supply and demand dynamics.

Domestic Glacial Acetic Acid Monthly Market Analysis

The average price of glacial acetic acid in East China was RMB 2749/ton, down 4.55% month-on-month; the average price in North China was RMB 2844/ton, down 4.95% month-on-month; and the largest price drop was in South China, with the average price falling to RMB 2813/ton, a decrease of 7.31% month-on-month.

Glacial Acetic Acid Profit Analysis

Methanol-Glacial Acetic Acid price Spread Analysis: In the first half of the month, the port market mainly fluctuated. Domestic supply remained high, while the number of foreign vessels arriving at ports was relatively low, leading to a slight decrease in port inventory and tight available resources, providing bottom support for spot prices. In the middle and latter half of the month, the market was affected by the opening of the Strait of Hormuz and the easing of international tensions, causing port prices to fall rapidly, and the price support brought by the previous tight supply completely weakened. Glacial acetic acid prices fell somewhat in the first half of the month, but in the middle and latter half, with the interplay of supply and demand, the market gradually stopped falling and rebounded, and the methanol-glacial acetic acid price spread turned positive.

Profit Analysis: The profit for glacial acetic acid in East China was -230.88 yuan/ton, a decrease of 97.57 yuan/ton month-on-month, a drop of 73.19%. The profitability of glacial acetic acid enterprises continued to decline, mainly due to high and volatile costs and weak supply and demand, resulting in a significant inversion between costs and glacial acetic acid prices, thus pushing enterprise profitability to a new low for the year.

Inventory Analysis

At the end of the month, the ending inventory of glacial acetic acid enterprises was 13.18 tons, a decrease of 9.1% compared to the end of the previous month. The average inventory was 147,800 tons, a decrease of 17.15% compared to the previous month. The main reasons for the fluctuation in production enterprise inventory were: an increased rate of maintenance and unexpected failures in glacial acetic acid production, coupled with relatively high costs, exacerbating losses for glacial acetic acid enterprises, and maintaining firm prices at the bottom; maintenance and delayed resumption of operations at some factories in East China led to a tight supply in the region, resulting in an overall decrease in inventory.

Market Outlook

July Forecast: The price of glacial acetic acid is expected to decline. On the one hand, the opening of the strait will likely lead to a drop in methanol prices, potentially tightening the valuation of glacial acetic acid. On the other hand, the traditional off-season for acetate esters, coupled with concentrated maintenance shutdowns of some vinyl acetate plants, may slightly weaken downstream demand.

In summary, with costs and demand continuing to decline, new Glacial Acetic Acid plants are expected to come online, but the support from market sentiment may be limited. Market supply will gradually ease, and the overall price level may shift downwards.

Three-Month Forecast: The main influencing factor for glacial acetic acid in the next three months will be the interplay of supply and demand. During the third quarter, only Guangdong Shengyuanda is expected to start production, but downstream demand growth may lag behind supply, and the contraction in downstream companies' profitability will limit the increase in demand for glacial acetic acid. However, with the opening of the strait, the product value may decline; attention should be paid to the export strength of downstream products.