AFPM ’13: US phenol, acetone softening on cheaper feedstocks

22 March 2013 23:59  [Source: ICIS news]

HOUSTON (ICIS)--US phenol and acetone prices are starting to soften on lower feedstocks, but the decline might not be enough to spur healthy demand, sources said on the eve of the International Petrochemical Conference (IPC), held in San Antonio, Texas, by the American Fuel & Petrochemical Manufacturers (AFPM).

“We haven’t reached a point where being a few cents cheaper means we’ll buy more,” a phenol buyer said. “We need big drops in prices to be competitive.”

US phenol prices have dropped by 5.75 cents/lb ($127/tonne, €98/tonne) since the start of the year, tracking upstream benzene prices tightly.

That drop has not been enough to spur additional buying interest, especially in regards to export material.

Sources said deals for US phenol have been done at a discount to benzene in the first quarter, and that current bid/offer levels have premiums at 3-5 cents/lb over benzene.

“It’s a bad time for the phenol-acetone market,” a producer said. “It doesn’t make sense to sell anywhere except in your own market.”

The pressure created by low phenol margins has pushed acetone producers to look to boost margins over their key feedstock, refinery-grade propylene (RGP).

However, US acetone buyers said margins reached their maximum levels in the fourth quarter of 2012 and need to soften.

“I’ve never rooted harder for phenol sales to pick up,” an acetone buyer said. “We can’t keep paying these premiums.”

Demand for acetone from the methyl methacrylate (MMA) sector is expected to strengthen in the coming months because of the US coatings season starting up.

Additionally, supply of acetone will remain tight because of low operating rates due to the weak phenol margins.

These factors could slow down any margin deterioration over RGP. And with the summer driving season approaching, US RGP prices could rebound in the summer.

Competition from imported acetone could alleviate some of the price pressure, but market players do not expect this.

“Everyone is too worried about price volatility to trust that their investment will remain sound while the material is on the water,” a trader said. “But everyone is still talking about bring it over.”

Major US phenol-acetone producers include Axxiall, Dow Chemical, Haverhill Chemical, Honeywell, INEOS Phenol, SABIC Innovative Plastics and Shell Chemical.

The IPC lasts through Tuesday.

($1 = €0.77)

By: John Dietrich

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