US May barge acetone expected to fall on cheaper propylene

24 May 2012 16:52  [Source: ICIS news]

HOUSTON (ICIS)--The US May barge acetone settlement is set for a drop, largely because of plummeting values for feedstock propylene, sources said on Thursday.

The April barge acetone contract was settled at 68 cents/lb ($1,499/tonne, €1,199/tonne) DEL barges (delivered via barges). Sources expect May will settle in the mid-50s cents/lb or lower.

The biggest reason for the expected drop is spot pricing of feedstock refinery-grade propylene (RGP).

Spot RGP prices have fallen by 28 cents/lb since the start of April, as assessed by ICIS.

Buyers argued that given the fall of RGP, they took the hit in the April settlement, which increased by 0.25 cents/lb from March’s level.

“When RGP fell at the end of the month, it benefited the producers,” a buyer said. “Now we need to see some those savings come our way in May.”

In May, spot RGP prices have been assessed by ICIS at an average of 52 cents/lb FOB.

As a result, producers argued that the May barge acetone settlement should only fall as low as the mid-50s cents/lb.

“Buyers are going to want to point to the most recent RGP numbers as the basis for May, but they have to remember what was going on earlier in the month,” a producer said. “We had to make acetone using the more expensive RGP.”

Producers also argued that demand for acetone remains healthy, especially from the key methyl methacrylate (MMA) market, and that supply is tight.

“The supply-demand situation needs to be considered, it’s not all based on propylene,” another producer said. “Also, we need to keep margins on acetone healthy to make up some for weaker margins on [co-product] phenol.”

The US barge acetone contract is agreed upon by three large producers - Georgia Gulf, INEOS Phenol and Shell Chemical - and the three largest buyers - Dow Chemical, Evonik and Lucite.

($1 = €0.80)

By: John Dietrich

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