US January barge acetone contracts rise 25% on RGP

25 January 2013 17:26  [Source: ICIS news]

HOUSTON (ICIS)--US January barge acetone contracts fully settled 25% higher, sources confirmed on Friday.

Buyers and sellers said all public settlements were agreed to at 66.5 cents/lb ($1,466/tonne, €1,110/tonne) DEL (delivered).

The December settlement was reached at 53 cents/lb DEL barges, which was a rollover.

“This settlement is a little on the low side,” a seller said. “But we’ll play again in February.”

Producers said that with spot prices for feedstock refinery-grade propylene (RGP) gaining 12-16 cents/lb since December, acetone prices should have increased more.

However, one producer said that the steep run-up in RGP prevented the full amount of the increase from being passed on.

The source said that increasing the acetone price too severely in a month can lead to demand destruction in the short term.

Buyers were more ambivalent about the agreement, but expected more of a fight in February.

One said that the run-up in RGP is hard to peg to improved demand, which could lead to a fall in the coming months.

“Is the surge in propylene from chemical cracking or is it seasonal from heating?” the buyer asked. “That’s the big question.”

The buyer added that if optimism regarding demand for acetone co-product phenol pans out, acetone margins can return to normal levels.

“We want these phenol buyers to start buying and buying a lot,” the acetone buyer said. “I’ve never rooted so hard for benzene to come down in my life.”

Regarding acetone’s margin over RGP, one producer said there will need to be an increase in the February barge acetone contract to restore margins.

“We’re hoping we can get the ratio back on track in February and March,” the producer said. “Right now it’s a little low.”

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

($1 = €0.75)

By: John Dietrich

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