2020 Acrylonitrile Semi Annual Report: Demand For Shrinkage Resulting In Oversupply Of Acrylonitrile Prices Reached A Record Low

In 2020, it was a difficult year for the acrylonitrile industry. In the first half of the year, the sudden outbreak of the world led to a sharp shrinkage in demand, which also led to an oversupply of acrylonitrile. Since the beginning of the year, the price of acrylonitrile has plunged sharply, and enterprises have been losing money and reducing production greatly. In the second half of this year, with the new capacity of Zhejiang Petrochemical Company put into operation, the contradiction between supply and demand will be further upgraded.

First, the epidemic has led to shrinking demand, and acrylonitrile prices have reached a new low.

Despite the long expected oversupply of acrylonitrile in 2020, the global outbreak has led to a shrinking demand, making it oversupply. In the first half of the year, the average price of acrylonitrile domestic market was 8445 yuan / ton, down 36.23% compared with the same period last year, the lowest value in April was 6300 yuan / ton, and the highest value was 11000 yuan / ton at the beginning of the year. 1-4 month by the domestic and foreign epidemic influence, the downstream demand reduced sharply, ABS, acrylic and acrylamide three downstream industries started to decline obviously, resulting in the price of acrylonitrile continued to decline unilaterally, and the profits of enterprises also suffered heavy losses. Starting from May, acrylonitrile enterprises took measures to limit production, and the industry's start-up rate dropped to less than 60%. At the same time, domestic demand recovered, supply and demand was improved, acrylonitrile prices also bottomed out, and prices rose to 8500 yuan / ton by the end of June.

Figure 1 price chart of acrylonitrile market in China

Two, excess supply, acrylonitrile inventories, high inventories

The effective capacity of domestic acrylonitrile in the first half of 2020 was 2 million 249 thousand tons / year, an increase of 260 thousand tons over the same period in 2019, an increase of 13.07%. In the first half of this year, the total output reached 999 thousand and 800 tons, an increase of 22 thousand and 300 tons compared with the same period in 2019, while the increase was 2.29%. The obvious increase in output was mainly due to oversupply of demand, resulting in oversupply. In the 2 quarter, acrylonitrile manufacturers concentrated production on a production deficit situation.

Fig. 22019-2020 comparison of acrylonitrile production and operation change

The average operating rate of domestic acrylonitrile industry in the first half of 2020 was 73.73%, down 6.68 percentage points compared with the same period in 2019. The lowest operating rate in May was only around 55%, which was 36 percentage points lower than that in May 2019.

Fig. 32019-2020 comparison of acrylonitrile stock data

Under the background of oversupply, the inventory of acrylonitrile enterprises also increased rapidly. In March, enterprises and social inventories even exceeded 70 thousand tons level, and the stock level remained basically at 30 thousand tons in the same period in previous years.

Three, the demand for year-on-year reduction in acrylic fiber startup rate has dropped significantly.

The domestic epidemic spread in late January, and most of the terminal industries began to close to a halt. Acrylonitrile main downstream acrylic fiber and ABS and other industries started to gradually decline, the overall load in February was only 50%. Later, despite the gradual recovery of domestic demand, foreign trade orders broke down, and foreign trade orders had shrunk dramatically, especially the demand for acrylic terminal textile, which caused a slight increase in the acrylic fiber industry in March and dropped to less than 30% in April. At the same time, due to the shrinking demand of foreign oil fields, polyacrylamide products have reduced export orders and the industry's start-up rate has dropped to below 60%. However, the ABS industry started to pick up gradually, and the high rate of opening up in 5-6 for 95% months is also the main driving force to support the rebound in the price of acrylonitrile in the current period. In the first half of the year, the proportion of acrylonitrile downstream consumption accounts for only about 21%, which is 4 percentage points lower than that of the same period last year. The proportion of ABS industry consumption accounts for 40%, while the consumption of acrylamide industry accounts for 20%.

Fig. 4 start and change of three downstream industries of acrylonitrile

Four, imports of acrylonitrile decreased year by year and exports increased.

In the first half of 2020, the total import volume of acrylonitrile was estimated at 127 thousand tons, down 27.59% from the same period in 2019, and the export volume reached 34 thousand and 400 tons, representing an increase of 310% over the same period in 2019. The shrinking domestic demand is the main reason for the sharp decline in import volume. At the same time, because of the sharp drop in prices, the profits of domestic and foreign enterprises are seriously compressed, and the price of imported goods is also lack of arbitrage space. The increase in exports was directly stimulated by oversupply in the country, especially in 1-4 months, and the products were mainly exported to Korea and India.

Table statistics of import and export volume of acrylonitrile in China in the first half of 12020 years

Five, the second half of the new capacity to put acrylonitrile dilemma difficult to break

The biggest profit in the second half of 2020 will come from the new capacity of Zhejiang Petrochemical Company, which will lead to an oversupply of acrylonitrile industry, and there is no room for growth in downstream demand. Therefore, most of the time is expected to remain hovering near the cost line, and the mainstream price will be between 7000-9000 yuan / ton.

1, Zhejiang Petrochemical new capacity to put acrylonitrile oversupply continued

Zhejiang Petrochemical 260 thousand tons of acrylonitrile new device was officially put into operation in June 23rd, and was officially sold in July. At present, the effective total production capacity of acrylonitrile has reached 2 million 509 thousand tons / year, and the total domestic demand for acrylonitrile in 2019 is also about 2 million 200 thousand tons. In 2020, the expected demand growth will be restrained and may even shrink. In view of this, the situation of excess supply of acrylonitrile will increase in the second half of 2020. In addition, the external situation is complex, and the export of acrylonitrile products also has resistance. China, as the largest consumer market in the world, is still expecting shocks from imports.

Fig. 5 Statistics of supply and demand in acrylonitrile industry

Under the background of oversupply, domestic acrylonitrile producers will expect to reduce production in the second half of 2020. Especially for some producers who need to extract raw materials, cost pressures will also force them to reduce load and even stop. It is estimated that the start-up rate of acrylonitrile industry will be reduced to 80% in the second half of the year.

2, the scale of downstream industries is stable and demand growth is limited.

In the second half of the year, the three downstream industries of acrylonitrile have no plans to increase production capacity, and the overall scale of the industry is expected to be stable. In addition, from the actual demand of start-up rate, it is expected that the ABS industry will still maintain a higher load of over 90%. After 7-8 months of production and consumption, the startup rate of acrylamide industry will gradually increase to more than 60%. There are still variables in the acrylic fiber industry. Due to repeated outbreaks, orders for foreign trade have not yet been recovered, and downstream industries such as spinning are hard to see. However, from the cost point of view, acrylonitrile will result in a low price this year due to overcapacity. Therefore, the price of acrylic fiber products and the competitiveness of substitutes will also increase correspondingly. The overall start-up rate of acrylonitrile industry in the second half of this year is slightly higher than that of the same period last year, but the overall growth space is limited by the old.

3, the cost pressure will still exist acrylonitrile products profitability is expected to be difficult to improve.

In the second half of the year, the price of raw propylene will remain high. In the three quarter, the demand rate will continue to rise during the peak season. However, taking into account the pressure on the downstream cost and the launch of the new capacity plan, the price of propylene in the fourth quarter is expected to fall. It is expected that propylene prices will continue to rise in the second half of the year, but there will be no risk of plunging. For acrylonitrile, the price of 6000-7000 yuan per ton of acrylonitrile means that acrylonitrile price will remain at least 8000-9000 yuan / ton to maintain breakeven. Therefore, although the supply of excess will lead to the weakening of acrylonitrile prices, there is no possibility of deep down under cost pressures.