Fast rise in Europe acetone spot prices thwart demand

08 February 2013 12:08  [Source: ICIS news]

By Julia Meehan

LONDON (ICIS)--The rapid rise of acetone spot prices in recent weeks has finally resulted in some buyers retreating to the sidelines because values are now too high, sources said on Friday.

Acetone truck business is now being done in excess of €1,100/tonne ($1,486/tonne) FD (free delivered) NWE (northwest Europe) and sources in the distribution market have been told by their primary suppliers to expect to pay no less than €1,300/tonne from next week onwards.

However, a trader said some of its customers were “retreating to the sidelines” because of acetone spot price developments.

“Around Antwerp and Rotterdam it’s become very expensive. The big problem is finding the spot material then paying the price. This leads to customers saying they will not take it, they say it’s too expensive and will wait for it to go down. 

“There are two sets of customers, those that are still buying because they need to buy and the others who say we don’t buy anything at all – it’s too expensive,” the trader added.

Another trader said: “We started out on €1,100/tonne and we see prices going up even further. A realistic number on an FCA [free carrier] basis is now in the high €1,100s/tonne, but I also heard €1,200 on an FCA basis.”

The trader said demand was somewhat of a “blur” because there were so many enquiries for acetone in the market at the moment.

“It’s a snowball effect. Demand is better than a month ago but everybody is looking and everybody is calling. It could just be one user and seven people looking on their behalf,” the trader added.

Spot acetone prices have been rising sharply since the middle of January because of cuts in primary product phenol, acetone exports to the US and good demand from major derivative methyl methacrylate.

However, not every buyer can simply stop running their facilities and therefore stop consuming acetone and some are rather vexed about the rise in acetone prices just because the phenol derivative market is suffering.

A large contract customer of acetone said: “If I look at the situation, everybody reduced stocks at the end of December and some reduced too much and this volume is missing. I’m pretty sure this volume would be here and we would not be talking about tightness or problems getting material,” the buyer said.

The buyer felt that margin lost on phenol was being “covered up” by the price of acetone.

A second major buyer also spoke about “poor year-end management”.

“I don’t think demand is strong. It’s poor year end management. I think they [the producers] have taken a risk when they took production down at the end of the year,” the buyer added.

Meanwhile, producers say demand has been healthy, particularly for major acetone derivative MMA, but the poor demand for phenol has inevitably resulted in ongoing cuts in phenol operations.

In relation to its phenol demand, a major phenol producer said it was mixed in Europe and not exclusive to any particular derivative.

“In general we're seeing a very strange pattern. Some [customers] are saying its picking up or just the same and others are saying they are trying to get margins up,” the producer source said.

“What we are seeing is a gradual improvement, but it’s a mixed bag.”

Phenol operating rates in Europe are estimated to be running at 70-80% of capacity because of poor macroeconomic conditions and lack of export demand to Asia.

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

($1 = €0.75)

By: Julia Meehan
+44 20 8652 3214

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