The spot price of acrylonitrile has once again breached market expectations. On July 7, Lihuayi Lijin Refining lowered its acrylonitrile spot price by 200 yuan/ton for the second time in a single day, to 9,200 yuan/ton ex-works, with its 260,000-ton/year facility running at full capacity. This price level approaches the low range seen in the same period last year, but instead of triggering bargain hunting, it has deepened market caution.
Drivers of the Price Decline
The acrylonitrile price drop is not an isolated event. On the feedstock side, propylene prices have been weakening, eroding cost support. Lihuayi, as one of China's major acrylonitrile producers, often sets a benchmark. The rare double intraday cut signals mounting inventory pressure at the producer level.
More critically, supply is rigidly expanding. Lihuayi's 260,000-ton/year plant running at full capacity means over 20,000 tons per month flowing into the market. Nationwide, total acrylonitrile capacity has exceeded 5 million tons per year, with operating rates above 70%. The gap between supply growth and demand growth is widening, which is the fundamental reason for price weakness.
Downstream Demand Blockage
Acrylonitrile's main downstream sectors include acrylic fiber, ABS resin, acrylamide, and carbon fiber. Acrylic fiber, a key textile raw material, has seen operating rates drop from 80% at the start of the year to around 60%, due to sluggish apparel consumption. ABS resin is also suffering from weak demand in real estate and home appliances.
While carbon fiber has long-term potential, its short-term absorption of acrylonitrile is limited. Domestic carbon fiber capacity is expanding rapidly, but downstream applications like aerospace and wind turbine blades are not scaling up at the same pace, leaving carbon fiber producers with their own inventory woes.
For textile buyers, the 9,200 yuan/ton ex-works price means acrylic fiber raw material costs are at a two-year low. However, most weaving mills are adopting a hand-to-mouth purchasing strategy, refusing to build inventories. This wait-and-see attitude reinforces the downward spiral: lower prices lead to more waiting, which forces further price cuts.
Regional and Chain Reaction
Lihuayi is based in Shandong, a province that, together with Jiangsu and Zhejiang, accounts for over 70% of China's acrylonitrile capacity. Price adjustments in Shandong quickly ripple through spot markets in East and South China. Traders report that port inventories are at medium-to-high levels, spot trading is thin, and even small-lot deals can be negotiated at discounts on top of the ex-works price.
The beneficiaries of falling acrylonitrile prices are downstream acrylic fiber and carbon fiber producers. For acrylic fiber, raw material costs account for over 60% of total costs. A 200 yuan/ton drop in acrylonitrile theoretically expands acrylic fiber profit margins by about 120 yuan/ton. However, weak end-order books prevent the full realization of this benefit, as acrylic fiber producers have to cut prices to compete for orders.
Outlook and Strategy
In the short term, acrylonitrile prices face further downside risk. July and August are traditionally slow months for textiles, with little demand recovery expected. Meanwhile, new capacity is slated to come online in Q3, adding to supply pressure. Prices may find support around 9,000 yuan/ton, but any rebound in crude oil or propylene could temporarily halt the decline.
For industry participants, the key is not to call the bottom but to manage risk. Volatility is rising, with single-day adjustments of 200 yuan/ton becoming common. Buyers need more flexible price-locking mechanisms rather than relying solely on monthly contracts.