Nobody in the acrylic acid market could disagree that 2019 was a hugely challenging year which saw prices plummeting, and margins squeezed within a highly competitive atmosphere. The weakness of the European economy was only one side of the story, affecting most downstream markets, particularly the automotive sector. The added complication has been the addition of new acrylic acid and superabsorbent (SAP) capacity in Europe in the form of Nippon Shokubai’s Antwerp acrylic acid and SAP capacity expansion, creating a structural change in the market.
The startup of Nippon Shokubai’s new acrylic acid plant in Antwerp in 2018 (100ktpa acrylic acid and 100ktpa SAP) was the trigger for a battle for market share in Europe as supply rose rapidly whilst the downstream markets failed to keep pace, and indeed demand in most sectors slipped back. Both the SAP and the acrylates markets have lost momentum with demand faltering in response to the slowdown in the world economy, and margins dwindling.
Whilst it is likely that there will be some improvement on acrylates margins this year, even if it is modest, the main concern is really the acrylic acid market. There is no sign at the moment that there will be any changes to market sentiment and the slow erosion of margins unless some drastic action is taken by one or more producers to cut production partially or fully.
It is possible that one of the major producers may look to cut production, or that a smaller producer could decide to step out of the market. In 2016, Dow took action in the US, closing 20% of its local acrylic acid and acrylates capacity. This helped to stabilise the American market and improve margins.
Over the past year, acrylic acid spot prices in Europe have fallen from €1200-1220/ton in January 2019 to €890-930/ton in January 2020. Freely negotiated contract prices have also fallen by more than the propylene pass through. Acrylic acid producers are subsisting with dwindling margins, but prices keep softening to an unsustainable level.
SAP demand in Europe is growing by just 1-2%, and globally, SAP growth rates are much lower than they were just a few years ago. In China SAP was a booming market growing at around 14- 15% in 2016, whilst in 2019 growth was just 6-7%. There is no sign of an improvement in the short term, and 2020 looks like being another difficult year for the acrylic acid industry.