Intermediates: Acetone shortage drives up prices

12 March 2012 00:00  [Source: ICB]

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Production outages have left the European acetone market so tight that buyers are more concerned with availability than price.

"It's all about volume first, then discussing a price later," a European trader remarked on March 2. "You can [name] any price, but there simply is nothing in the market."

Supply has been snug in the US, as well, but sources there blame low demand for co-product phenol and the resulting lower operating rates. In Asia, prices have firmed as imports dried up.

HEALTHY DEMAND IN EU

European spot prices for acetone leaped 47% in February, from €790-840/tonne ($1,045-​1,111/tonne) the week ending February 3 to €1,150-1,250/tonne the week ending March 2.

One trader bought at €900/tonne in early February and resold above €1,300/tonne on March 2.

"I had some in stock, but now I have run out. If I need to buy, my purchase price is €1,200/tonne," he said, estimating the week's price range at €1,200-1,300/tonne on a free delivered (FD) basis.

Another trader, who did not see such high spot prices, found a lower range.

"I did some sales at €1,040-1,070/tonne FCA [free carrier]," he said, "but not big volumes - maybe two or three trucks here and there. But I see €1,100/tonne FCA for next week. There is no product coming from the US or Asia."

Acetone demand has been healthy overall, and better than expected from the methyl methacrylate (MMA), bisphenol A (BPA) and solvents sectors, but short supply − the result of both planned and unplanned outages − has played a greater role in the increases, market sources said.

A planned outage at Spain's CEPSA Quimica, which began on February 21, is expected to have ended March 3, while Novapex remains in force majeure at Roussillon, France, because of benzene supply problems. INEOS Phenol is preparing for a major turnaround in April at its facility in Gladbeck, Germany.

Buyers and sellers speculated that the situation would persist at least through May, and some suggested that the market would not return to a balanced position until June or July.

"How long will the market stay like this is the main question," observed a reseller. "It's so high already, and at a certain point, it won't be healthy anymore.

"The outlook for acetone won't change until the end of May; I think June is a month too much," said another source.

Much depends on the successful restart of INEOS Phenol's plant in Gladbeck, and whether demand remains high. The availability of precursor cumene could also play a role. US-based Sunoco, which exports cumene to Europe, has announced that it will close its 545,000 tonne/year plant in Philadelphia, Pennsylvania, if a buyer cannot be found by July.

Meanwhile, the market has also been contending with the rising cost of feedstock propylene. After bottoming out in December at €995/tonne FD (free delivered) NWE (Northwest Europe), propylene contracts climbed to €1,105/tonne for February and another 8% to €1,195/tonne for March.

This €90/tonne propylene increase, and the market's overall tightness drove March acetone contracts for methyl methacrylate (MMA) producers up by €100/tonne over February. ICIS assessed March contracts at €995/tonne FD NWE on March 2.

A DIFFERENCE OF OPINION

In the US, February contracts for barge acetone were settled late in the month at 63 cents/lb ($1,389/tonne, €1,042/tonne) DEL (delivered), up by 20 cents/lb from the January price, or 47%.

Market sources cited the surge in refinery-grade propylene (RGP) prices as the significant driver.

"Everyone had a different opinion of where RGP traded at in February," a producer said. "When something goes up as fast and hard as RGP did, it leads to a disconnect."

Spot RGP prices, assessed at 63-64 cents/lb the week ending February 3, rose to 68-69 cents/lb the week ending March 2, a disproportionately small increase of only 8%. Over the month of January, however, spot RGP prices gained 19.5 cents/lb − a 44% increase that was left out of the January acetone contract, which increased only 4% (1.5 cents/lb) over December to 43 cents/lb.

"The January settlement was low," another producer remarked. "February needed to make up for it."

acetone graphs

Producers said operating rates had been low, owing to weak demand for co-product phenol, and the acetone supply had tightened as a consequence.

Buyers said that although the surge in the February contract was understandable, it was not good for the market.

"I don't have any supporting arguments to bring the price lower, but these big swings don't help the market at all," said one.

Sources said demand in the barge acetone market had been stable in February. However, they had heard that key MMA producers were having non-acetone feedstock issues, and they thought demand might therefore slip in March.

The US barge acetone market is settled by three producers − Georgia Gulf, INEOS Phenol and Shell Chemical − and the three largest buyers − Dow Chemical, Evonik and Lucite.

SHRINKING IMPORTS IN ASIA

In Asia, spot prices have been stable to firm. Market sources cite tightening supply and a shortage of fresh, deep-sea cargoes, as well as rising feedstock costs and strong demand in China.

During the week ending March 2, spot prices in China rose by $10-15/tonne to $1,055-1,080/tonne CMP (China Main Port) an increase of 2% from four weeks before, according to ICIS.

Major Chinese domestic producers Sinopec Gaoqiao Petrochemical and Sinopec Beijing Yanshan Petrochemical kept prices at yuan (CNY) 7,900/tonne EXW (ex-works) and CNY7,700/tonne EXW, respectively.

The prices of imported cargoes rose by CNY50-300/tonne to CNY8,200-8,300/tonne ex-tank in east China and CNY8,100/tonne ex-tank in south China as traders snapped up spot material amid rising import costs.

At 57,796 tonnes, January acetone imports to China were 30% lower than a year ago, reflecting the fall off in deep-sea cargoes.

The market has been quieter in Southeast Asia, where spot prices were assessed as unchanged at $1,030-1,050/tonne SE (Southeast) Asia on March 2.

  • Includes reporting by John Dietrich in Houston and Liu Xin in Singapore

By: Clay Boswell
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