After the National Day holiday, the acrylic acid market in China went against the trend by 4% of a seasonal slowdown and instead entered a period of strong performance characterized by rising prices and active trading. The rally, which took many industry watchers by surprise, has its roots in a delicate balance of limited supply and unchanging downstream demand, thus changing the market's mood and pricing ways.
A major factor in the price hike is the intentional cutting back of acrylic acid production in the domestic market. The average capacity utilization rate on October 9th was 76.44%, which is a decrease of 1.45% points from September. This reduction was strategic. Some manufacturers chose to reduce their production or to go for maintenance shutdowns during the holiday periods because of high inventories of acrylic acid and financial difficulties. Thus, a critical spot supply tightening of acrylic acid was facilitated right as the market resumed trading.
The supply squeeze is further strengthened by a very solid inventory structure. The holidays brought about a cautious and conservative atmosphere among traders and downstream buyers, resulting in the latter stocking less and thus social inventories of acrylic acid remaining low. Now, after the holiday, when there is very little pressure on channels and factories due to the lean inventory, sellers get empowered to keep their prices, that is, not to discount.
On the demand side, though there has not been any explosive growth, the market surely is still receiving the support of demand for acrylic acid that remains steady in the key sectors of superabsorbent polymers (SAP), resins, and emulsions among others. These sectors require constant volumes of input, and the recent holiday restocking has offered enough power to take up the limited supply.
This unwavering demand of acrylic acid, which is not backed by huge volumes, is, however, very effective in its capacity to keep the prices up. Buyers who are aware of the tightening supply situation of acrylic acid and are expecting additional cost pressures, have altered their tactics accordingly. The previous do-nothing-and-see-happen approach has been replaced with a proactive procurement, even at high prices, to ensure that no inventory is missed.
A possible sign of the market's changeover is the shift in mood that has taken place and is perhaps the most reliable indicator. A few years back, sellers were always waiting for the opportunity to sell off their inventory but now they are reluctant to do so as they are supported by cost and scarcity. The buyers, on the other hand, are increasingly agreeing to pay more, because of the fear of further price rises, and the lack of low-priced options.
This psychological shift has sped up the process of selling off the low-priced stock of acrylic acid and raised the minimum transaction price at the same time. There are in fact fewer low-price deals now and more buyers agreeing with each other that prices are higher, so the market has moved up.
To sum up the situation, the increase in the demand for acrylic acid in China after the holidays is not a short-lived occurrence but rather a result of good supply management, strict control of inventory, and strong demand. As per ChemAnalyst, stakeholders might have to recalibrate their expectations concerning the price and availability of acrylic acid in the coming weeks, as these forces are still dominant the market.
