AA keeps the downward trend in 2011 and could be reasonable fallback. AA keep high margin rate backed by healthy downstream demand. Dragged by European financial crisis and Middle East turbulence, AA decease range recorded over Rmb 10000. Then high profits times went by. Insiders thought AA stepped into reasonable retreat route. 2011 saw a obvious fall for AA value while also could be turning point for AA future development.

Major factors of AA trading value fall in 2011

Form March, 2011 domestic AA market weakened. Whole market presented weak except goods supplies tightened in June and July. Weak downstream demand and capacities surge is the leading factors for AA softened market.

As a result of American debt crisis, global crude oil future reported volatile stance and stock reported average fall. Global economy presented bearish. AA imports fell back, which suppressed homemade AA rising trend. Tightened downstream trend, rather rapid RMB appreciation pace led to relatively small number of downstream export orders, low operation rates and slow consumption of feedstock. Upstream market still presented healthy, which failed to prop the AA market.

Increase of profit has attracted many enterprises to invest and expand capacities. There has been an increasing pace of capacity expansion. At present domestic annual AA consumption amounted 600,000 tons. Half of the production has been used to produce Sole resin these PU elastomer. As a result of rapid expansion it is predicted that domestic AA capacities will rise from 730,000 tons to 1030,000 tons, which could add more pressure to the current market and downward trend will be inevitable.

Review: AA is destined to increase

Review of AA market, pricing has witnessed surge in comparison with that of 2009 while ended with slight decline as a result of weak downstream prop.

2010 AA increase range recorded at Rmb 7000/ton and highest was in March to April and October- November, which also was over Rmb 3000/ton. In Half 1 as AA facilities were under maintenance and always reported problems, market volume was tight. In addition domestic traders built stock and closed without quotations, which led to AA pricing surge. While in Half 2, as a result of power restriction policy, shortage of coal supply and traders speculation, AA pricing surged to record high Rmb 24500/ton.

During process of sharp price rising, approaching the end of 2010,AA price dipped, which confused most players.

AA market is promising in 2015 with demand reaching 5.5 billion pounds

According to insiders, global AA demand will reach 5.5 billion pounds by 2015. That is to say, although price dipped in 2011,the future remains bright.

It is said that main factors that will support development of AA market include end market, capacity expansion, new applications, technical breakthrough and market price. In terms of end market, nylon 66 has become the largest application of AA market and PU resin is the most rapidly growth sector.

AA market will encounter its golden age in the next few years with increasing needs from developing market. There is no doubt that Europe is the largest AA market currently, driven by developing countries like China, Asia-pacific area will be the fastest growing market. Domestic AA plants are as follows: Asahi kasei, BASF, Invista, Lanxess, Sinopec, Liaoyang Petrochemical, Rhodia ,Solutia and so on.

The overall chemical industry is facing price falling and over capacity issues including AA market. The coming years will focus on quality enhancement and brand competition.