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Insight | Time: Jun 14 2017 11:04AM
How will acrylic fiber market fare after large price fall?
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On Jun 12, Jilin Chemical Fiber issued June acrylic fiber offers, ASF 1.5D and 3D lowered by 850yuan/mt from May offers to 15,000yuan/mt and 14,950yuan/mt respectively and acrylic tow offer dipped by 1,000yuan/mt to 15,700yuan/mt by cash, delivered. After the news came out, yarn market shocked and some spinners expressed the severe business situation. Players confused about late market.

In terms of costs, demand for ACN remains sluggish and the market is still under downward trend. Currently, PetroChina Fushun has shut down its 92,000 mt/year ACN plant at Liaoning on Jun 10th, 2017 for more than 30 days of scheduled maintenance and PetroChina Jilin closed its No. One 106kta ACN plant on Jun 12, 2017 and the restarting time was unconfirmed. Sinopec Anqing cuts its ACN plant operating rate and Shanghai Secco plans to cut its ACN output, down 3,000-4,000 tons per month during Jun and Jul 2017. Supply tends to reduce. But on concern about sluggish downstream market, ACN sales may keep dull.

Supply and demand

After Jilin Chemical Fiber released the Jun offers, it also announced the plan to shut down its 300kta acrylic fiber plant for maintenance from Jun 13-14, 2017. The turnaround will last about two weeks. As most plants cut operating rate, operating rate of acrylic fiber plants will reduce to a low level and supply will tend to reduce.

For demand, some spinners did not purchase acrylic fiber during Apr and May when prices were relatively high or some mainly purchased on need-to-basis. Affected by stricter environmental protection policy and unfavorable end-user demand, downstream dyeing plants also witnessed ordinary production, leading to higher yarn stocks. Currently, the market stepped into slack season and sales did not improve, so yarn inventory is hard to be consumed. Moreover, the sharp decline of ACN prices may appear panic mood and players may expect prices decrease further. Therefore, the price decline may fail to stimulate the demand from spinners.

Cash flow

With falling ACN price and stable acrylic fiber price, cash flow has reached the break-even line. And this round of price decline enlarges the deficits. Currently, acrylic fiber plants have witnessed losses, so they do not expect a further price decline.

In general, with the turnaround plan, the lower offer of Jilin Chemical Fiber is mainly attributed to the lackluster market and unsmooth sales and it is predicted that other plants will cut the prices as well recently. After price decrease, influenced by unfavorable cash flow, acrylic fiber prices may stabilize. If ACN prices slip later, the downward space for acrylic fiber price will enlarge and with unfavorable sales, acrylic fiber prices may keep down.
[RISK DISCLAIMER] All opinions, news, analysis, prices or other information contained on this report is provided by analyst of Zhejiang Huarui Information Consulting Co., Ltd (CCFGroup) as general market commentary and does not constitute investment advice. CCFGroup will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
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