US barge acetone contracts gain 1.1% in August on tight supply

29 August 2012 20:12  [Source: ICIS news]

HOUSTON (ICIS)--The US August barge acetone contract reached a full settlement at a 1.1% increase, sources said on Wednesday.

Buyers and sellers confirmed the US August barge acetone contract settled at 45.5 cents/lb ($1,003/tonne, €792/tonne) DEL barges (delivered via barges).

This is a 0.5 cent/lb increase from July’s settlement at 45.0 cents/lb DEL barges.

Sources attributed the slight gain to continued tight supply because of low operating rates, as well as efforts by producers to keep margins over feedstock refinery-grade propylene (RGP) healthy.

The July barge acetone settlement was the first time in 2012 that acetone was at a premium of more than 1 cent/lb to RGP, according to ICIS.

Typically, acetone has been at a discount to RGP because margins on acetone co-product phenol over its key feedstock, benzene, were strong.

However, record-high benzene costs and weak phenol demand have pushed phenol-acetone producers to chase margins on the acetone side of the business, sources said.

“Phenol demand is not robust, there’s no place to put it,” the producer said. “That means acetone has to pick up the slack.”

Buyers said the margins cannot get much higher, and that their downstream demand, largely in the methyl methacrylate (MMA) market, is starting to soften on seasonal factors.

“We were expecting a rollover this month,” an acetone buyer said. “But in this world a slight increase is pretty good.”

The US barge acetone contract is negotiated between three large acetone producers – Georgia Gulf, INEOS Phenol and Shell Chemical – and the three largest buyers – Dow Chemical, Evonik and Lucite.

($1 = €0.79)

By: John Dietrich

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