FocusAsia IPA makers may cut production on rising acetone costs

10 December 2012 04:43  [Source: ICIS news]

By Yeow Pei Lin

IPA is typically used in the pharmaceutical and agrochemical sectors, as well as a solvent in the coatings industry.SINGAPORE (ICIS)--Acetone-based isopropanol (IPA) producers in Asia may have to reduce output as rising feedstock costs have made them less competitive than their peers that rely on the more cost-effective propylene as raw material for production, market sources said on Monday.

At least one producer in northeast Asia has suspended IPA production, while another is considering lowering its plant run rates because of negative margins, they said.

Margins for acetone-based units have fallen into negative territory because of the divergent IPA and acetone price trends in the past few months.

IPA prices have declined by $70/tonne (€55/tonne) from end-September levels to $1,340/tonne CFR (cost and freight) SE (southeast) Asia in the week ended 7 December as a result of weak year-end demand and increased regional supplies, according to ICIS data. The price is equivalent to around $1,260-1280/tonne FOB (free on board) NE (northeast Asia).

Prices of acetone, however, chalked up gains of $117.50/tonne in the past eight weeks to $1,110/tonne CFR China in the week ended 7 December, ICIS pricing data showed.

The current spread between the IPA export prices in northeast Asia and acetone CFR China prices is now less than $200/tonne, below the minimum spread of $200-250/tonne typically required by IPA producers.

“The situation does not look good for producers. Acetone prices look to be still strong this week but (IPA) buyers are unwilling to accept a price increase because of the weak downstream demand,” said a trader.

To make matters worse, producers using acetone for IPA production are facing increased competition from their counterparts that rely on the lower-cost propylene.

“Producers using propylene are still enjoying healthy margins based on today’s IPA prices. This will make it difficult for the other suppliers to increase prices,” a buyer in southeast Asia said.

China’s Jiande Xinhua Chemical switched to producing isopropylamine at its 100,000 tonne/year IPA/isopropylamine swing plant at Jiande in Zhejiang province last month, while another northeast Asian producer who declined to be identified said it is considering lowering its IPA production.

($1 = €0.78)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections


By: Yeow Pei Lin



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