13 July 2012 15:25 [Source: ICIS news]
By Julia Meehan
Some players do not appear to have been fazed by the expected start-up of 12 new plants between 2012 and 2015 and with it 1.7m tonnes of additional acetone capacity in China alone – that is a capacity growth of between 35% and 40%.
This was certainly the case at the 7th ICIS World Phenol and Acetone conference in Madrid, Spain in June when a panel of industry experts agreed that acetone will always find a home, as it always has done – although this message was not necessarily bourne out of complacency on the part of producers.
Demand in Europe has been steady in 2012, but not as strong as in 2011, when orders for phenol and acetone and all downstream products were strong, particularly in the first half of the year, as buyers restocked through the chain.
An element of restocking also took place at the start of this year, but as global economic concerns heightened, and stocks were replenished, the market started to show signs of slowing.
Looking to 2013, the lack of liquidity and uncertainty in the market has made it very difficult for producers and consumers of phenol and acetone to make accurate forecasts.
However in general, acetone demand in Europe is expected between 2012-2015 to grow by about 1-1.5% and by some 4-6% worldwide, major industry sources say. Phenol demand growth, meanwhile, has been estimated at 10% globally, although this is seen as rather ambitious by some in the industry who see a rate of 6-7% as more realistic.
Phenol/acetone capacities have been raised in Europe and significant new builds in Asia will add to supply. Clearly, the demand for phenol has driven the capital investment. But for every one tonne of phenol produced in conventional processes, producers are left holding 0.62 tonnes of acetone.
Phenol production is stimulated by demand for bisphenol A (BPA) into polycarbonate, which also requires acetone, epoxy resin, phenolic resins, nylon intermediates and alkyl phenol. On the other hand, acetone demand is tied more closely to demand for methyl methacrylate (MMA) or solvents.
Ultimately, phenol demand is driven by fast growing polycarbonate. Acetone growth tends to more closely mirror gross domestic product (GDP). Acetone prices are inevitably impacted at times of low demand and high availability.
But new uses for acetone are developing and it has become clear more traders are handling or are interested in it. The acetonel market is seen as being very “liquid”.
Over the years there has been much talk about recycling acetone for the production of isopropanol (IPA) and this process is absorbing some volumes.
In January 2010, Novapex began commercial deliveries from its 40,000 tonne/year IPA plant in Roussillon, France, using acetone as feedstock.
The French company said recently that it will be doubling IPA from acetone output. The expansion will be in two phases. The first will add 10,000-20,000 tonnes/year of IPA capacity at Roussillon, and is expected to be completed by mid-2013. A timeframe for the second phase of the expansion has not yet been set.
Novapex considers that the high-end IPA market will see greater long-term stability than the acetone market. “Acetone is more a commodity product than IPA. With additional capacity in Asia, we think acetone will structurally weaken,” a company source said at the time of the expansion announcement.
It has been predicted that there could be a 200,000 tonne/year surplus of acetone by 2015, but this figure could be revised down following the high level of demand that has recently evolved in Asia in the aliphatic water-reducer market.
Water-reducers are concrete admixtures that are enjoying strong growth alongside concrete demand in Asia.
Yet, although the demand for this application has been welcomed by major European producers, some of which have new plants planned in Asia, some market participants are not so optimistic that the application is the answer to their prayers.
Producers, which already have a presence in Europe and are bringing on new capacities, include CEPSA Caojing in Shanghai, with 250,000 tonnes of phenol and 150,000 tonnes of acetone. The start-up is scheduled for the third quarter of 2014. Another is the INEOS Zhangjiagang joint venture in Jiangsu. It will have a capacity of 400,000 tonnes/year of phenol and 250,000 tonnes/year of acetone and is due to start up 2014-2015.
To coincide with the new phenol capacities in China, new BPA plants totalling 1.1m tonnes/year are due on stream by 2015. They will consume up to 1.05m tonnes/year of phenol and 630,000 tonnes/year of acetone, but clearly leave significant acetone volumes looking for a home.
MMA demand is key here and while the market is growing – driven by the growth in electronics – it is not just Asia that is the draw.
Some market participants believe markets in Latin America will offer new growth and even mirror recent growth in Asia. These markets are being driven by demand for paints and consumer electronics.
UK-headquartered Lucite International, which is owned by Japan’s Mitsubishi Rayon, re-started its 155,000 tonne/year MMA plant in Beaumont, Texas, in the US, earlier this year. The company had mothballed the facility in the fourth quarter of 2008.
Evonik has also been working to expand its capacity at its 150,000 tonne/year MMA plant in Fortier, Louisiana. No new capacity estimates have been made available. The Germany-based company is also planning to build a new MMA facility although a location has not been revealed.
On the surface it seems the European acetone market is not yet too worried about what will happen if by 2015 all the new capacities planned for phenol and acetone in Asia come on stream.
If there is no demand for exports to Asia, this could lead to over-supply in Europe, although markets in the US and South America would be potential outlets.
Demand growth in South America is such that studies are underway on a new phenol plant in Brazil.
And, in the current economic and operating environment, 2015 seems like a long way off. Predicting what will happen from one week to the next currently is proving impossible, let alone for three years ahead.
As one industry player said: “Who knows what is going to happen in any market these days, even the people in the know – don’t know.”
However, what the market does know is that while “the good old days” are long gone, demand for acetone in construction, automotive and pharmaceutical applications will persist. It’s just a case of how strong that demand is – and where it will be.
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