USES

Ethyl acetate (etac) is an active solvent that is mainly used in industrial lacquers and surface coating resins. It is also used as an extraction solvent in the production of pharmaceuticals and food, and as a carrier solvent for herbicides. Miscellaneous uses include adhesives and solvents.

SUPPLY AND DEMAND

China, with 3.45m tonnes/year of capacity, is Asia’s largest producer and exporter of etac. The prolonged supply overhang means that Chinese etac producers have had to cap their long-term plant utilisation rate at around 50%. The supply overhang has also worsened in recent years as capacity expansion in the Middle East and Asia ensures that etac supply continues to outpace demand growth. China exported 400,901 tonnes of etac in 2016, a decline of 1.2% from 2015, according to the country’s Customs data.

The market also witnessed some consolidation in recent years. Japan’s Showa Denko in December 2014 closed a 50,000 tonne/year etac plant in Indonesia, operated under the name PT Showa Esterindo Indonesia. Showa Denko in June 2014 started up a 100,000 tonne/year new plant in Japan, which uses its proprietary production process technology and closed an older unit with identical capacity in October 2014.

The excess capacity, which had prompted Middle Eastern and Indian producers to export their surplus material to South Korea, Singapore and Malaysia, has also led to the implementation of tariffs. In September 2015, South Korea introduced antidumping duties (ADDs) on etac imports from India, in addition to extending the existing ADDs on etac imports from China.

Chinese producer Jiangmen Handsome Chemical Development in October 2015 commissioned a new 200,000 tonne/year plant at Taixing. The plant boosted Jiangmen Handsome’s total etac capacity at its two sites to 500,000 tonnes/year. In March 2017, South Korea’s sole etac maker Korea Alcohol Industrial commissioned a new 45,000-50,000 tonne/year plant. This crimped South Korean demand for Chinese as well as Middle Eastern material and exacerbated price competition among existing producers.

PRICES

The excess etac supply in Asia means that prices tend to follow raw materials closely and that etac producers’ margins are constantly under pressure. The tendency among Chinese etac producers to compete for share in the export market solely on price also means that producers have had to contend with little or no margins.

Etac prices sank to a record low of $610/tonne FOB China in September 2016, before surging in Q4 2016 on the back of buoyant upstream methanol, acetic acid and ethanol prices. However, prices resumed downward in Q1 2017, weighed on by weak demand in China – in part a consequence of the Chinese government’s crackdown on polluting industries, the commissioning of Korea Alcohol’s new plant, alongside softer upstream prices.

TECHNOLOGY

The primary method of etac production in China and India, Asia’s two biggest producers, is through the esterification of ethanol with acetic acid in the presence of a catalyst. The ethanol used is chiefly derived from food crops. While ethanol in China is produced primarily from corn and tapioca, ethanol in India is derived predominantly from sugar molasses.

In 2013, Celanese commissioned a 275,000 tonne/year ethanol plant in Nanjing, which uses its patented TCX technology that turns natural gas or coal into ethanol by using acetic acid as an intermediary.

OUTLOOK

The lack of further industry consolidation since the end-2014 closure of PT Showa Esterindo Indonesia means that the Asian market is likely to remain bogged down by an overabundance of supply.

The worsening supply overhang in 2017, stemming from the start-up of Korea Alcohol’s new plant, is expected to prompt Chinese and Middle Eastern producers to divert their surplus volumes to other markets, namely southeast Asia and Europe.

Some Chinese producers are trying to offset the slow demand growth both domestically and abroad by capping their output. However, without further industry consolidation, the fundamental problems of weak producer margins and oversupply are unlikely to be resolved.