FocusIndia acetone may extend gains on tight regional supply

07 February 2013 06:49  [Source: ICIS news]

By Veena Pathare

Acetone is used as a solvent in the manufacture of pharmaceuticals and industrial coatings.SINGAPORE (ICIS)--Spot acetone prices in India may continue to increase through March on the back of limited availability of the product in Asia, market sources said on Thursday.

On 6 February, acetone was assessed at $1,090-1,140/tonne (€807-844/tonne) CFR (cost and freight) India, up by $5-20/tonne from the previous week, according to ICIS data.

Most acetone/phenol facilities in Asia continue to operate at reduced capacities since November last year, as margins are being squeezed by high feedstock benzene costs as well as weak derivative demand for phenol.

Weak global demand for polycarbonate (PC)  the key phenol derivative  has led to low phenol production in Asia and a consequent decline in acetone output. A steep increase in benzene prices, which rose by more than $150/tonne since September 2012, has also seen phenol/acetone makers struggling with squeezed margins.

The same problem afflicts the US and European phenol/acetone producers, causing acetone prices in these markets to spike.

Acetone is a by-product in the manufacture of phenol from feedstock benzene. For every tonne of phenol produced, 620kg of acetone is made.

Asian acetone offers for February shipment to India were few, with producers mostly sold out on spot cargoes for the month.

“We have no cargoes to offer for February, and plan to initiate discussions for March after the Lunar New Year holiday,” said a source from a Taiwan-based producer, which regularly sells spot cargoes to India.

Selling ideas for March-loading cargoes were heard higher because of limited availability of cargoes, market sources said.

A separate Taiwanese acetone producer quoted $1,080/tonne FOB (free on board) Taiwan, or $1,140-1,150/tonne CFR India for March lots.

“Prices in March are likely to be firmer, or at least at similar levels despite softer demand from China during the Lunar New Year, because tightness in product availability will lend support to higher prices,” the producer said.

India consumes about 120,000 tonnes of acetone each year, more than half of which are imported from northeast and southeast Asia, while the rest is covered domestic production.

Acetone is used as a solvent in the manufacture of pharmaceuticals and industrial coatings.

Spot acetone prices in the Indian domestic market are moving in tandem with Asian prices, which increased to $1,140-1,160/tonne CFR CMP (China Main Port) in the week ended 1 February, up by $5-10/tonne from the previous week, according to ICIS.

Regional prices were underpinned by high production cost, tight supply and steady derivative demand.

India’s acetone producers have recently hiked their list prices for the material in view of the limited availability of the material in Asia.

On 5 February, domestic producers increased their acetone prices by Indian rupees (Rs) 2/kg ($38/tonne) to Rs78/kg EXW (ex-works), excluding discounts.

Domestic producers usually offer discounts on the list prices, and the effective price after discount is comparable to the ex-tank price for domestic cargoes.

Offers for imported cargoes also increased by Rs1-1.5/kg to Rs73-73.50/kg ex-tank Kandla this week, market sources said.

Firm Taiwanese offers for March-loading cargoes are expected after the Lunar New Year holiday. The holiday is celebrated in most parts of the northeast and southeast Asia for two days at most.  But in China, the festivity will last a full week from 9-15 February.

($1 = €0.74 / $1 = Rs53.13)

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

By: Veena Pathare
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