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Adipic Acid——An Unsparing Fall

Imperiled by non interests, benzene price dives down. Adding to tight supply plus the high price of pure MDI constraining the operation downstream, adipic acid (AA) market sets out falling from the middle March. As for April, the downtrend goes further, notwithstanding the high quotation. Benzene market turns to downward consolidation once again in the middle April whilst Haili Chemical lowers its quotation by RMB 1,000/ton to RMB 11,800/ton, accelerating the slump. When it comes into May, AA keeps an unsparing fall.
For the being, mainstream quotation of AA is heard at RMB 9,300-9,600/ton in east China, down by RMB 2,700/ton over early March, or a decrease of 22.3%. Factories and traders are all caught at a wrong foot by such a large and fast decline. Although the market is always waxed and waned, the slide-like slump still makes them bearish against the backdrop of the previous roaring.
Supply-demand relation is crucial for price fluctuation. PUdaily believe that this round of decline is mainly ascribed to surplus supply. The figure below suggests a rising operation load, especially in April. Restart of Haili AA facility push the overall load to a higher level, thus resulting in oversupply. AA price slumps faster amidst such background.

Looking forward, Shanxi Taihua supposes to put its AA equipment into production this month, and Xinjiang Tianli is to restart its AA production in late June. As such, the supply is expected to increase further. As for demand, May and June are the inevitable slack season with shrinking demand. Given the regular operation and additional capacity, the conflict is deemed to intensify. Currently, the market is in a fall overall, transactions tend to be dealt at low prices, and the price keeps moving down. It is estimated that the price will break the RMB 9,000/ton line soon. Taking costs factor into consideration, PUdaily anticipates that the price of RMB 8,500-8,800 is likely to be the first resistance level where the market price is approaching.