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| India Infoline Sector Reports | Thu, 04-Dec-2003 16:32:45 IST (GMT+5:30) | |
| Organic chemicals | ||
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Acetic Acid Acetic acid is a colorless liquid with pungent odour. There has been a significant growth in capacities as the technology is easily accessible and capital costs are low. There is a rising demand for acetic acid. The demand is expected to be around 8-10% till early next year. There are 23 units engaged in the manufacture of acetic acid. All but one of the units is based on industrial alcohol and is much smaller in size. Excess capacity is being tapped for exports. This is a commodity product with high volumes and low margins. This is an intermediate product used for the production of vinyl acetate monomer, purified tetraphthalic acid and acetic anhydride. These are in turn used as intermediate products for the manufacture of polyester, plastics, paints, and pharmaceuticals. Manufacturing process Oxidation process In this, acetaldehyde derived from fermented alcohol is oxidized to produce acetic acid and acetic anhydride in 70:30 ratio. The process can be varied so as to produce 100% acetic acid. Liquid phase oxidation process There are two ways of producing acetic acid by this process. First Methodology In this process the oxidation of acetaldehyde takes place in a reactor. The end product contains acetaldehyde and acetic acid. Pure acetic acid is then recovered whereas unconverted acetaldehyde is recycled. Second Methodology This process involves simultaneous production of acetic acid and acetic anhydride. On using copper catalysts, water that is produced hydrolyses acetic acid. There can be variations regarding the ratio of acetic acid and acetic anhydride required to be produced.
Methanol carbon monoxide method Carbon monoxide is made to react with methanol. This results in the formation of crude acetic acid. This is purified and dehydrated into acetic acid. This process requires heavy capital expenditure and installation of huge capacities. All manufacturers use acetaldehyde as major feedstock with the exception of GNFC, which uses methanol. Markets This can be used in the following products PTA PTA contributes about 16% of the total acetic acid demand. Acetic acid is used in the oxidation of paraxylene to convert to PTA. About 0.09 ton of acetic acid is required to produce 1 ton of PTA. Currently Reliance is the only producer of the PTA in the country. VAM This accounts for about 15% of the total acetic acid demand. About 0.80 tons of acetic acid is required to produce 1 ton of VAM. VAM finds its usage in the paints and acrylic industry. Acetic Anhydride This constitutes nearly 19 % of the total demand for acetic acid. About 1.3 ton of acid is required to produce 1 ton of anhydride. Anhydride finds its
usage in the pharmaceuticals such as paracetemol and aspirin. Food stuff This constitutes nearly 5% of the total demand for acetic acid. It finds its usage in the manufacture of citric acid, glutamic acid and lysine. Esters These constitute nearly 11 % of the acetic acid demand. About 0.80 tons of acid is required to produce 1 ton of esters. The major esters are methyl acetate, ethyl acetate, butyl acetate etc. They are in turn used in the manufacture of paints, plastics, coatings and printing inks.
Diketene This constitutes 10% of the total demand for acetic acid. These are used in intermediate products such as acetoacid, esters, acetoamides that are in turn used as intermediates in the manufacture of pesticides, dyes and pigments. Capacity The total capacity is estimated around 0.275mn ton out of which 19% is based on methanol. GNFC with its methanol-based capacity is the largest producer with 50,000 mt capacity. Low entry barriers in terms of capital costs and steady rise in the industry usage have lead to the addition of capacities. Almost 40% of the output is routed to captive utilization as large producers have integrated forward in the manufacturing anhydrides etc. There is an element of variability in the total output of the production capacity as the plant can be used for both manufactures of acetic anhydride and acetic acid. Manufacturers of acetic acid and their market shares
Installed Capacity - Acetic Acid (Mt)
Pricing and costs Alcohol contributes 50% of the total cost of acetic acid. The volatility in the molasses market often manifests in the prices of acetic acid. The international trend of declining prices is reflected in the domestic markets as well. Large producers, who have integrated forward, are insulated from price variations. Inspite of the cut in import duties, the landed cost of the imported acetic acid has remained higher than that of the Indian product, thus the Indian manufacturers have been insulated to a large extent. Most of the manufacturers have integrated forward to exploit the duty cuts. Outlook The volumes are expected to increase, but margins will remain under pressure. The initial outlook was optimistic as large capacities of PTA were being planned, but the shelving of these projects has led to oversupply and consequent drop in the prices of acetic acid. In 1996-97 GNFC and EID Parry created additional capacities to the tune of 60,000 ton, while consumption grew only by 34,000 ton.
The demand has picked up mainly due to the commissioning of the Hazira plant manufacturing PTA. The total demand is expected to be around 0.20-0.22mn ton in 1999-2000. Consolidation is envisaged, as small players will exit due high level of competition and high business risk. The capacity utilization has come down to about 68% in today's scenario. Oversupply is bound to continue and consolidation is envisaged. Exports are ruled out at the moment, as international prices are on the decline and the Indian producers are experiencing rising costs of inputs. Attempts by a group of Indian producers, to form a consortium, have yielded results by way of exports rising to Rs141mn.
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