Europe acetone spot availability diminishing

17 January 2013 15:39  [Source: ICIS news]

LONDON (ICIS)--European spot acetone availability will continue to diminish as long as phenol operating rates remain at low levels and prices in Asia and the US keep rising, market sources said on Thursday.

Phenol rates in Europe and the rest of the world have been brought down since the second half of 2012 and there are no signs coming from the key derivative polycarbonate (PC) market that rates will be turned up anytime soon.

Acetone is a by-product of phenol. For every tonne of phenol made, approximately 0.62 tonnes of acetone is produced.

In relation to the PC market, two major producers were downbeat over demand and the high cost of raw material benzene.

One major PC producer said: “We are very concerned about the benzene increase. It will kill demand. It's terrible - it's going to be very difficult because we can't pass this on.”

A second major buyer of phenol for PC production described its demand as “very low”.

“The demand situation on the PC side is very low and we hardly have any margin at all. It’s ongoing and really started in September.”

In terms of acetone price developments, a trader said: “I saw the lowest acetone prices in December. Spot prices are not reacting to feedstock developments, it’s more of a supply and demand situation."

Feedstock propylene can often determine the direction of acetone prices, and while the acetone MMA (methyl methacrylate) contract price moved down in January on the back of the €13/tonne fall in the propylene contract price, spot acetone prices have been steady.

Since December, acetone prices have been in the low-to-mid €800s/tonne FD (free delivered) NWE (northwest Europe).

Europe is now the cheapest region for acetone.

In the US, spot acetone is valued in the low €900s/tonne, while in Asia, Chinese spot acetone prices are in the upper €800s/tonne.

Because prices are more attractive elsewhere, European traders have been looking to secure volume to export to other regions, but have been unable to secure any cargo.

A major producer said it had no reason to offer lower prices in Europe, when it could get a better price elsewhere.

“Asia is netting back at €820/tonne so why sell it next door when we can export it. The US is so tight,” the producer said.

“The US situation will stay if propylene stays. Look at the phenol business last year. In the US, margins were OK but demand was flat. Europe was not good last year,” the producer added.

In the trader market, a re-seller said it was looking to secure volume for export, but could not find sufficient quantities.

“I’ve seen a lot of customers back asking for product. There is no product available for export and we are asking everybody for volume,” the trader said.

“It’s looking like up and coming tightness. February and March could prove interesting,” he added.

Acetone off-take from large contract buyers in the MMA market has been strong, according to sellers. A major maker of MMA confirmed that it was running its facility “flat out” in order to build stocks ahead of the coating seasons.

“Our strategy is to be ready for the coatings season and we are running (MMA) as hard as we can,” the MMA producer said.

It also confirmed that it was struggling with its acetone supply in the US.

“I’m not sure if we are running into a road block in February,” the producer added.

Buyers and sellers of acetone to the solvents sector think that spot acetone will remain firm during the second half of the month, particularly if prices remain high in the US and Asia and phenol demand fails to improve.

($1 = €0.75)

Author: Julia Mehaan

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