FocusAcetone spot price falls under mixed market pressure

05 July 2012 17:09  [Source: ICIS news]

LONDON (ICIS)-European spot acetone prices continue to decline as demand slows, supplies improve and feedstock costs come down, market sources agreed on Thursday.

Prices peaked in March this year because of various planned and unplanned outages on phenol production in Europe.

Feedstock propylene prices were also very high during this time.

However, as production resumed to normal levels during the second quarter, acetone spot prices started a gradual decline.

Looking back over the past three years, spot acetone has followed a similar pattern; with notable dips seen around November-December time and peaking in April and May, largely because of production problems occurring around the same time every year.

The direction of feedstock propylene has more of a physiological, rather than direct impact, on spot acetone prices, compared with the acetone contract which is more closely linked to a formula.

However, in recent months the spread between spot acetone and propylene has narrowed and because of this some market followers think that European producers will not allow the prices of spot acetone to drop by much more.

In relation to its current spot prices, an active trader said: “I think prices will bottom out in July and I don’t think they will break €700/tonne ($875/tonne) FD NWE. We are seeing production cutbacks [in phenol] and traders are pushing product because nobody wants volume in their tanks.”

“Demand is lousy and everyone is buying hand-to-mouth because they [the end-users] are expecting even lower prices,” he added.

The trader quoted €760-780/tonne on an FD (free delivered) basis in NWE (northwest Europe), although he said he had heard lower.

Another trader, based in the ARA (Amsterdam, Rotterdam, and Antwerp) region said its demand this week was non-existent.

“I don’t know about this [market] anymore because people are saying different things. Demand is non-existent and sentiment is so negative,” the trader said.

The trader quoted €730-760/tonne FD NWE its market price for this week.

Sentiment was not all doom and gloom: indeed sellers say they can still do business in the €800s/tonne. Some also say their demand for early July has not been so bad.

However, those that have seen a slight boost in their orders books for July, think this could simply be because customers ran their stocks to virtually zero in June in anticipation lower feedstock prices in July.

Inevitably the summer holidays in July and August result demand dip.

In addition exports to Asia remain unworkable with the arbitrage from Europe to Asia firmly closed.

One producer described its demand as “good” and “better than usual”.

“Demand is good, but I am afraid this is only due to previous month where people were trying to understand what was happening and now that are buying again. It’s better than I was expecting, but people are remaining very, very, cautious.”

“Buyers are afraid to put acetone in storage because it might lose value,” the producer added. 

Looking ahead to August, the majority of the market is expecting a typical quiet month in terms of demand and pricing.

But the big question mark for the acetone market is the month of September and if this will be a “better” month for the petrochemical sector in general.

In relation to this a European producer said: “For the moment the markets are not under so much pressure, but there are no good signs. I hope September will be good otherwise we risk losing any [positive] results for this year.

On a contractual basis, the July European acetone methyl methacrylate (MMA) contract price has been agreed down by €136/tonne from the June following the €170/tonne drop in the July propylene contract price. The July acetone MMA settlement was agreed at €778/tonne FD NWE.

A major supplier of acetone in Europe said contract negotiations had been “very difficult”.

Producers and consumers' interpretations of the balance of the European acetone market were quite different and this had resulted in a tough round of contract price discussions.

The producer said its demand was good and failed to see the length in the market that buyers were talking about. The buyer did not share this view.

Of course, the production of acetone is not determined by acetone demand, but by the demand for its primary phenol.

In the phenol market, producers and consumers have been cutting back on operating rates because global economic concerns have dampened demand for many phenol derivatives, particularly those that are exported to Asia, such as nylon intermediates.

Competitively priced imports of major phenol derivatives, such as bisphenol A (BPA) and epoxy resins have also impacted on margins and output in these markets.

BPA production accounts for around 40% of phenol demand in Europe. 

($1 = €0.80)

By: Julia Meehan
+44 20 8652 3214

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