Europe acetone market immune from oversupply, weak demand

19 June 2012 16:59  [Source: ICIS news]

MADRID (ICIS)--European acetone “will always find a home” despite periods of heavy oversupply and weak demand, industry executives said at a conference on Tuesday.

This is because acetone is a by-product of phenol, the production of which is driven by demand for phenol derivatives such as bisphenol A (BPA) and phenolic resins, rather than acetone.

For every tonne of phenol made, 0.62 tonnes of acetone is produced.

Regardless of how weak or strong acetone demand is, phenol manufacturers will run their facilities according to phenol demand.

“The answer is simple, nothing technical, in general demand for acetone is elastic and phenol is not. Acetone will always find a home,” said Ron Coyle, commercial director at INEOS Phenol.

When acetone gets oversupplied, spot prices can drop very quickly, but this did not seem to be too much of a concern for acetone producers. In fact, falling prices tend to absorb acetone through other outlets such as a solvent substitution.

“When acetone prices drop to a certain point the solvents markets will use it. When acetone gets long it gets to a point to incentivise people to use it,” Coyle said during a panel discussion at the 7th ICIS World Phenol-Acetone Conference.

“We never slow down because acetone does not find a home... we might not like the economics of it but it always finds a home. It’s about dropping to a price point where people will say I will use it,” he concluded.

Thomas Nitsche, director of phenol and acetone procurement at Germany's Bayer MaterialScience - major buyers of phenol and acetone for bisphenol A (BPA) production – said the length of the acetone market is never a long-term problem.

“Just because acetone is down in price does not mean it will impact my phenol demand. Look at a few months ago,” he said.

In the first quarter, the phenol and acetone market was plagued with production problems and the price of acetone skyrocketed as a result. An unexpected high level of demand for phenol and acetone derivatives also influenced the sharp price increase. Feedstock propylene also hit a record-high contract price.

“When there is a phenol problem the acetone price is always moving and always finding a home and reacting very strongly,” added Georg Buellesbach, general manager of Mitsui & Co's Germany-based 1st Basic Chemicals Division.

By: Julia Meehan
+44 20 8652 3214

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