Acrylonitrile Is in Short Supply

Stable growth of capacity

The world's production capacity for acrylonitrile was 6.14
million t/a in 2005 and the output reached 5.24 million tons,
an increase of 0.5% over 2004. The operating rate of production
units was more than 85%, being lower than the operating rate of
90% in 2004. The drop in utilization of capacity that is caused
by production suspension has been higher than the growth rate
of the new capacity in recent years. There is a supply deficit
of acrylonitrile in the world today, but the profit-earning
ability in the acrylonitrile sector is still very low.   
   The total capacity of acrylonitrile in China was around 1.013
million t/a in 2005 and the output reached 931 thousand tons.
Shanghai Secco Petrochemical Company Ltd., which just started
production in February 2005 has a capacity of 260 thousand t/a
and is the largest acrylonitrile producer in China today. The
national capacity expansion made in 2006 is 50 thousand t/a. It
is mainly distributed in CNPC Jilin Petrochemical Company Ltd.,
which expanded capacity from 212 thousand t/a to 250 thousand
t/a and CNPC Fushun Petrochemical Company Ltd., which expanded
from 80 thousand t/a to 92 thousand t/a. Total capacity of
acrylonitrile in China is forecast to reach 1.063 million t/a
at the end of 2006. The consumption of acrylonitrile in China
was 1.21 million tons in 2005 with a supply deficit of 279
thousand tons. The consumption is expected to increase slightly
in 2006.

Slight reduction of imports

Imports of acrylonitrile to China continued at more than 300
thousand tons a year in recent years - 318.6 thousand tons in
2004. Owing to the completion of the 260 thousand t/a unit in
Shanghai Secco Petrochemical Company Ltd. in 2005, the supply
ability in China improved drastically and the import amount was
reduced to 316.4 thousand tons. The import amount already
reached 158.4 thousand tons in the first half of 2006, and it
is expected that the total for 2006 will be higher than that for
2005. The acrylonitrile imported to China comes mainly from
Korea, Japan, the United States and Taiwan province. Starting
from 2005, China exported some acrylonitrile, reaching 31.9
thousand tons in the first year. The major exporter is Shanghai
Secco Petrochemical Company Ltd.

Stable increase of consumption

The worldwide market demand for acrylonitrile was 5.031 million
tons in 2005, an increase of only 0.2% over 2004. Acrylic fiber
was still the major consumption sector for acrylonitrile and the
consumption in this sector accounted for around 50% of the total.
The consumption in ABS (acrylonitrile-butadiene-styrene) resin
accounted for 31%.
   Based on an analysis made by PCI Consulting Co., Ltd., the
demand growth of acrylonitrile in Asia (especially in China) was
the fastest in the world in 2005. The demand in 2006 will be 0.5%
lower than 2005 mainly because the demand in the fourth quarter
of 2006 is expected to be lower than the same period of 2005.
   The demand for acrylonitrile in China has increased
constantly in recent years. New acrylic fiber units will
increase the demand of acrylonitrile. The use of acrylonitrile
in ABS resin will grow more than 10%. The apparent consumption
of acrylonitrile in China reached 1.216 million tons in 2005,
17.9% higher than 2004. The consumption for acrylic fiber
production was 740 thousand tons, and around 320 thousand tons
were used in ABS resin.

Sustained high level of market price

The crude oil price in the international market remains high,
and the propylene price keeps rising. The low operating rate in
some major acrylonitrile suppliers will lead to a market supply
deficit. The production restoration made in some units has eased
the supply tension, but due to the impact from the production
suspension in some large units, normal supply can hardly be
restored for a short period of time. Acrylonitrile sources will
therefore sustain a supply deficit likely to boost the high
market prices being quoted by suppliers. Due to the impact from
factors such as force majeure in refineries, the propylene price
has increased drastically for a considerable period of time and
already hit a new high for recent years. Acrylonitrile suppliers
are suffering from a huge cost pressure, due to the recent
dramatic cost increases, acrylonitrile suppliers will be forced
to increase the price of their products once again. Despite a
gradual weakening of the bearing capacity in downstream products,
the demand in quite a few downstream products such as ABS resin
and nitrile rubber is increasing constantly. The acrylic fiber
market also seems to be accommodating the rising cost pressure
by raising prices. Although such actions have met some
resistance, they serve to support the raw material price. It is
therefore hoped that the price of acrylonitrile will maintain
a trend of small margin increase. The weakening of the bearing
capacity in downstream sectors will however inhibit the
long-term rising trend of the acrylonitrile market price.

Table 1  Major Acrylonitrile Producers in China
                          in 2005                           
Producer                                Capacity (thousand
t/a)
Shanghai Secco Petrochemical Co.                          260
CNPC Jilin Petrochemical Co.                            212
Sinopec Shanghai Petrochemical Co.                      130
CNPC Daqing Petrochemical Co.    80
Acrylic Fiber Plant of CNPC Fushun Petrochemical Co.    80
Daqing Refining and Chemical Co.                         80
Acrylic Fiber Plant of Sinopec Anqing Petrochemical Co.    80
Sinopec Qilu Petrochemical Co.                          40
Source: CNCIC Chemdata

Table 2  Supply and Demand of Acrylonitrile in China
             in Recent Years    (thousand t/a, thousand tons)
Year                     2002    2003    2004    2005
Capacity                646     734     800     1 013
Output