Chemical profile: Asia acetone

07 June 2013 09:54  [Source: ICB]

Acetone is used in two main applications: the manufacture of methyl methacrylate (MMA) and bisphenol A (BPA). Acetone also goes into solvent applications largely used in pharmaceuticals manufacturing and is used to make a number of chemical intermediates, such as methyl isobutyl ketone (MIBK), ­isophorone and diacetone alcohol/hexylene glycol.

In recent years, China's apparent consumption of acetone has maintained high growth rates, driven mainly by expansion in the downstream BPA and isopropyl alcohol sectors. However, the speed of demand growth has slowed significantly because of the economic growth slowdown in China and weak conditions in the eurozone and the US.

Run rates at regional phenol/acetone facilities in Japan, South Korea, Taiwan and Singapore have been slashed to 60-80% of capacity since the fourth quarter of 2012, in response to weak phenol margins, which in turn curtailed the spot availability of by-product acetone.

Acetone supply tightened as a result of operating rate cuts at regional facilities, as well as a lack of deep-sea cargoes. However, supply remains largely balanced in Asia after recent capacity expansions in China and Korea.

China's capacity expansions have resulted in a sharp fall in its import dependency. China's total import volume fell by more than 7% to 690,000 tonnes in 2012 from 745,000 tonnes in 2011, following the commissioning of two new phenol/acetone plants in 2012.

China's total acetone production capacity is expected to reach 975,000 tonnes/year by the end of 2013.

Spot acetone prices into China, Asia's largest market, rose by 8.5% to an average of $1,150/tonne CFR China in mid-February 2013, from $1,060/tonne CFR China in mid-November 2012. Prices were driven higher by demand from the downstream solvents, isopropanol (IPA) and MIBK sectors in China, against a backdrop of deep phenol output cuts.

Acetone prices in Asia remained on a downtrend from mid-February to mid-March as the sharp decline in crude futures and upstream benzene and propylene costs dampened sentiment. However, regional producers are maintaining strict price discipline in view of tightened availability following the run rate cuts.

Spot acetone prices rebounded in late March and have since remained on an uptrend, driven mainly by tight supply following production cuts and a lack of deep-sea cargoes. Meanwhile, northeast Asian suppliers have been diverting cargoes to the Middle East and South America because of higher netbacks.

Spot acetone was firm at $1,120-1,130/tonne CFR China in early June, but trade was subdued amid tight supply and weak demand.

Nearly 90% of acetone is produced from cumene, which itself is made by the reaction of propylene and benzene in a phosphoric acid-based or zeolite catalyst. From cumene comes phenol and acetone. Approximately 0.62 tonnes of acetone is produced with each tonne of phenol made.

In comparison, the older isopropyl alcohol route, in which alcohol is dehydrogenated to acetone, has been declining in use. A newer process involving the direct oxidation of propylene has been gaining in importance. However, it is a more costly route and there are problems with corrosion.

The major challenge for the industry has always been the rising surplus of acetone, particularly in light of new capacities coming on stream in Asia in 2013 and 2014. Prices of acetone relative to feedstock costs are expected to remain weak in 2013 because of China's rapidly rising phenol/acetone capacity and the resultant fall in its import dependency.

The consequent margin squeeze is expected to keep phenol/acetone output at a reduced level in Japan, South Korea, Taiwan and Singapore in 2013.

As China's import reliance continues to fall, some of the excess volumes will be directed to markets such as India, the Middle East and South America.

Acetone use in water reducing agents is likely to enjoy a positive outlook in China as the country's construction requirements mean that there will be demand for high-performance concrete.

By: Joseph Chang
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