Confluence of Cost and Supply Factors Provided Strong Fundamental Support for Acrylic Acid

Price direction

However, given the sluggish end-market demand, there is a ceiling on how high the market can rise.

Last week, the benchmark price to acrylic acid rose from 7,983.33 RMB/ton at the start of the week to 8,050.00 RMB/ton, marking a week-on-week increase of 0.84%. The price of the upstream raw material, propylene, saw a significantly larger increase; on August 23, the benchmark price to propylene stood at 8,954.33 RMB/ton, up 12.95% from the beginning of the month. As the rise in raw material costs clearly outpaced that of the finished product, this represents a classic cost-driven market direction.

Fundamentals

Cost side: A sharp rise in the feedstock propylene provided a fundamental floor to market prices.

Propylene is the primary raw material to acrylic acid, accounting to over 60% of total production costs. This month, propylene prices surged due to energy-related factors and production facility disruptions, immediately driving up acrylic acid production costs. Producers raised their quotes to offset these raw material costs; while the price increases to the finished product lagged behind those of the feedstock, the sector's processing margins saw a recovery.

2. Supply Side: Plant maintenance led to a substantial tightening of spot supplies.

Domestic production facilities to acrylic acid and downstream esters have entered a concentrated maintenance period; consequently, sector operating rates have declined, and commercial inventories have dropped to their lowest levels of the year. With a high proportion of output committed to contract orders, the volume of spot material entering the open market has contracted. This, combined with a surge in export orders, has further depleted domestic inventories. Manufacturers are maintaining firm spot prices due to the reality of tight supply, rather than engaging in artificial price speculation by withholding stock.

3. Genuine follow-through of essential demand from immediate downstream sectors drove transmission across the sector chain.

Manufacturers of butyl, ethyl, and 2-ethylhexyl acrylates are making essential purchases, while downstream ester producers maintain operations; this generates tangible demand to acrylic acid, driving an increase in spot trading volume—a necessary condition to the realized pricing of acrylic acid.

However, a distinction must be made: while immediate downstream sectors show essential demand, end-market demand remains weak. End-consumption industries such as coatings, emulsions, and adhesives are still in their traditional off-season, characterized by purchasing limited to immediate needs rather than extensive stockpiling. The market dynamic is essentially defined by "smooth transmission among intermediates however sluggish absorption by end markets."

Market constraints

While fundamentals support the current rebound, practical constraints exist that limit the possible to a sustained, sharp rally:

1. End-user demand is currently in a traditional off-season; downstream manufacturers of coating products emulsions are only willing to absorb cost pass-throughs rather than actively driving up raw material procurement. The limits of end-user affordability cap the upside possible to acrylic acid and its esters;

2. The 20-day and 30-day medium-to-prolonged moving averages have not turned upward, indicating that the price movement is merely a technical rebound;

3. Units currently undergoing maintenance are set to resume production; the resulting increase in supply will exert downward pressure on market prices.

Market Outlook

In the short term, supported by the fundamentals of propylene costs, low inventory levels, and essential downstream demand to esters, the prices of acrylic acid and its esters (butyl, ethyl, and 2-ethylhexyl esters) are maintaining a direction of fluctuating with an upward bias. Market movements are rooted in genuine cost and supply-demand dynamics; there are no conditions present to speculative trading to drive prices away from these fundamentals.

From a medium- to prolonged perspective, the sustainability of the market direction hinges on two key fundamental variables: first, whether the price of propylene feedstock can remain at a high level; and second, the interplay between the increase in supply—following the restart of units undergoing maintenance—and end-market demand. Should costs soften or a significant volume of supply hit the market, this rebound faces the risk of a pullback.

Key indicators to monitor: propylene spot prices, the restart progress of units under maintenance, the sustainability of export orders, and the operating rates of downstream coating products emulsion producers.

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