Shell US acetone hikes surprise, dismay buyers

12 June 2008 17:42  [Source: ICIS news]

HOUSTON (ICIS news)--Shell’s announcement of a quarterly  price hike and a new monthly price caught many US acetone buyers by surprise on Thursday.

Shell said in a letter to buyers that it was instituting a monthly large buyer contract price of 67 cents/lb ($1,477/tonne, €945/tonne) effective on 1 July.

Shell would also raise its quarterly contract to 72 cents/lb, a 24.5 cent increase.

Acetone sellers typically issue a nomination for the upcoming quarter and a settlement is negotiated over three months.

A buyer said the increase was “major, arbitrary” and was severe and unbelievable.

“With hurricane season here and costs higher than ever, producers are undoubtedly concerned about margins, another acetone seller said. “A higher quarterly price over a monthly price is necessary in this environment.”

Other major acetone sellers including INEOS Phenol, Georgia Gulf and Sunoco have not yet made any announcements for July or third quarter.

Many sellers have urged buyers to move to monthly prices in the midst of volatile feedstock costs.

“It is amazing that this contract does not settle until the very end of the quarter,” one producer said. “By the time contracts are negotiated, upstream propylene has already changed three or four times and it is not a logical picture.”

Meanwhile, second-quarter acetone prices remained unsettled. Sellers have pushed for 5-10 cents/lb in hikes, citing record high feedstock prices, which have more than doubled in the year.

In many cases, sellers have had to reduce rates for economic reasons, creating a tight supply scenario.

A trader said no material could be found in June as sellers said they were “sold out” due to reducing rates on high propylene costs.

Refinery grade propylene (RGP) was trading for 73 cents/lb on Wednesday, and was up 40% from its price one year ago, according to global chemical market intelligence service ICIS pricing.

Buyers have been resistant to hikes due an oversupplied global market.

The first quarter large-buyer contract price for acetone settled flat at 47.5 cents/lb.

“Spot prices have been changing hands in the low to mid 40s cents/lb but material is suddenly not available for under 50 cents/lb,” a trader said

($1 = €0.65)

For more on acetone visit ICIS chemical intelligence
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By: Heather McGuire Doyle
+1 713 525 2653

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