Uses

Acetic acid is used as a chemical intermediate and solvent with widespread applications throughout industry. The largest outlet is vinyl acetate monomer (VAM), which is used in paints, adhesives, textiles, paper, films and chewing gum. The production of purified terephthalic acid (PTA) is the second largest outlet consuming 18% of acetic acid production. PTA is a precursor for polyethylene terephthalate (PET), itself used for bottle resins and polyester fibres.

Acetic anhydride and solvents (ethyl acetate, butyl acetate) are the third- and fourth-largest applications, respectively. There are many other applications from fragrances to foodstuffs and dyes to detergents.

Supply/Demand

The European acetic acid market entered 2020 in a balanced-to-tight condition. There was still something of an overhang from an unplanned outage at the Celanese Clear Lake plant in Texas, caused by a fire in September 2019, although the market was well on its way to recovering normal volumes of supply by the early months of the year. Demand at this time was relatively normal, although VAM was sluggish in some sectors.

The principal game-changer came towards the end of the first quarter with the onset of the coronavirus and subsequent lockdowns. In some areas, the economic consequences were immediate and very visible: for acetic acid, however, the effects on business were much less apparent and much more mixed. Those elements most exposed to industrial consumption have been quite strongly afflicted, albeit in a quite time-lagged fashion, while some areas, such as foods and water treatment, have hardly suffered at all.

Prices

At the beginning of 2020, the European market moved a little longer. However, at the time, first quarter and January contracts were being agreed, it was still roughly balanced, such that the lower values encountered now reflected more of a downward correction from the higher prices resulting from greater tightness in the final months of 2019.

In the second quarter, the pandemic bit into numbers almost throughout the chemicals value chain. By the middle of the year, the strains caused by the pandemic were starting to be relaxed but softer upstream methanol costs continued to exert some pressure on acetic acid valuations.

Technology

The dominant process is methanol carbonylation, which accounts for more than 65% of world capacity. Other processes include the oxidation of acetaldehyde and the liquid-phase oxidation of n-butane or naphtha.

One producer uses a different process, making acetic acid from beechwood. This is not a commonly adopted method. It is believed that acetic acid can also be created as a by-product of a process of acetylation applied to certain woods. This is an innovative technology that may lead to some marginal increase in output but is unlikely to contribute significantly to overall production.

Outlook

The fall-out from the coronavirus emergency is very difficult to forecast, and it is this path that is more likely than any other factor to determine the health of the market for many months to come. In general, May 2020 appears to have been the worst month for consumption, and June and July have shown early signs of recovery. Given the relative resilience of acetic acid to the darkest period,
a continuation of the return to usual social and commercial life being pursued by most governments around Europe should give grounds for hope of a reasonably sturdy second half of 2020.

Another development that could have major implications is the news that BP, the only world-scale producer of acetic acid in Europe, is to exit the market by selling its assets to INEOS. The early summer announcement of the sale probably provides more explanation to the latter’s decision to open a new VAM plant which is going to be built at Saltend near Hull, England, right next to the BP facility.

This unit will produce 300,000 tonnes/year of VAM when it comes on stream, scheduled for 2022, and will be a major consumer of acetic acid thereafter.

According to ICIS analyst Rob Searle: “While downstream demand in food and packaging applications remained steady throughout the lockdown period in Q2, there are concerns about the recovery in other industries. Consumption in the textiles, construction and automotive sectors was significantly hit as a result of the outbreak. While demand for coating and paints for construction has seen a rebound in recent months there remain concerns over whether the recovery in demand can be sustained throughout H2 2020. The outlook for the textiles and automotive sectors remains bleak with a poor recovery forecast for 2021.” ■