The supply of acetic acid in the Chinese market is rapidly increasing CAS NO. 64-19-7
In recent years, the acetic acid industry in China has matured, resulting in a relatively balanced supply and demand landscape. Some manufacturing enterprises have also started producing downstream products, primarily focusing on exporting acetic acid. However, with the anticipated rapid growth in acetic acid supply, there is a significant possibility of oversupply emerging, which will alter the existing supply-demand dynamics. The trend towards the integrated development of the acetic acid sector is expected to accelerate. In the first half of 2024, the total acetic acid production is projected to increase compared to the previous year, primarily due to the release of new capacities and the stable operation of existing production facilities. Major manufacturers have enhanced production efficiency through technological upgrades and optimized processes, further bolstering market supply.
The participants in the acetic acid market in China primarily consist of production enterprises, intermediary traders, and end-user factories. With the continuous development of the acetic acid industry chain in recent years, the supply and demand dynamics of the acetic acid market have reached a relatively balanced state. Historically, acetic acid production companies have faced minimal shipping pressure, maintaining acceptable profitability; thus, operational risks have been relatively low. An increasing number of enterprises have begun to prioritize integrated development within the industry chain by extending upstream to the raw material supply segment and expanding downstream to the production of acetic acid derivatives, thereby achieving optimal resource allocation and effective cost control.
In light of the changing supply and demand landscape, it is likely that the acetic acid market will experience surplus supply in the coming years, leading to compressed profit margins and increased shipping pressures, which will consequently alter operational trends.
【The Advantages of Integration】
Reducing Production Costs: Integrated enterprises can achieve self-sufficiency in raw materials, thereby minimizing procurement and transportation costs associated with intermediary stages, which enhances the market competitiveness of their products.
Strengthening Risk Resilience: During market fluctuations, integrated businesses can internally adjust to flexibly respond to adverse factors such as rising raw material prices and declining product demand, thus mitigating operational risks.
Enhancing Industrial Synergy: The integration of the supply chain facilitates coordinated development in production, sales, and research & development, ultimately improving overall operational efficiency.
The profitability is acceptable, with priority given to export-oriented acetic acid production enterprises.
Many acetic acid enterprises in China are equipped with methanol feedstock facilities, which aids in cost control. Additionally, the supply and demand for acetic acid are relatively balanced with no direct competition from substitutes, resulting in favorable profit margins in recent years. Consequently, the majority of production companies maintain high operational loads and consistently stable external sales of acetic acid. The downstream production companies primarily utilize the acetic acid produced, with limited internal consumption, as acetic acid offers the most stable profitability and relatively high profit margins within the industrial chain. In terms of integrated development of acetic acid and its downstream sectors, as of now, companies producing acetic acid with accompanying downstream operations account for 52.9% of the total number of enterprises, which is considered an average level. Most of these companies are involved in the production of acetate esters, with smaller quantities producing vinyl acetate, anhydride, and PAT, among others.
【The future may experience an oversupply, further promoting integrated development】
In recent years, the capacities of acetic acid’s primary downstream products—PTA, ethyl acetate, and vinyl acetate—have increased. Additionally, there are plans for further installations in the coming years, leading to a sustained growth trend in acetic acid demand. Coupled with favorable profitability in the acetic acid sector, this has resulted in numerous new construction plans on the supply side in China. According to statistics from ZGK Information based on public data, there are approximately 13 to 14 million tons of planned acetic acid projects in China. Among these, projects expected to commence production between 2025 and 2026 account for about 8 million tons. Currently, domestic acetic acid capacity stands at approximately 12 million tons, indicating an astonishing growth rate for acetic acid capacity in the future.
Currently, it appears that the growth in acetic acid demand is not keeping pace with the increase in supply, which may lead to an oversupply situation in the future. This imbalance is expected to impact the operating rates within the acetic acid industry and exert downward pressure on prices, consequently narrowing the profit margins for acetic acid producers. Furthermore, many proposed acetic acid projects are not located in the current primary production and consumption regions, as substantial capacity expansions are planned in areas such as Northwest, Central China, North China, and South China. This new influx of acetic acid supply is likely to be challenging to absorb locally, necessitating distribution to surrounding regions and thereby creating a new competitive landscape.
New market entrants are also mindful of the intensifying competition, with approximately 70% of companies planning to develop supporting downstream facilities to achieve integrated operations. Most of these companies are opting to produce vinyl acetate as a derivative product, with some considering acetic anhydride as well, due to the relatively better profitability of these derivatives compared to other downstream products of acetic acid. However, when examining the capacities of these downstream facilities, it becomes evident that they will not be able to fully absorb the projected acetic acid production volumes, with theoretical production capacities significantly exceeding the theoretical internal consumption levels. This indicates that new acetic acid manufacturers continue to prioritize external sales of acetic acid in their planning processes. Nevertheless, as acetic acid prices are constrained by oversupply, the pressure on costs for downstream operations may decrease, potentially leading to an increase in production levels within certain downstream sectors. This could help alleviate some of the shipping pressures faced by acetic acid producers.
