Chemical profile: US acetone

03 January 2014 09:31 Source:ICIS Chemical Business

USES
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.

 
SUPPLY/DEMAND
Acetone was balanced to snug as the new year began, stemming largely from co-product phenol production rates that are expected to continue averaging 65-70% for the foreseeable future.

Acetone supply may tighten further if phenol run rates drift lower. Some sources say dismal domestic phenol demand and the absence of any near-term hope for a restoration of export demand from Asia may force US manufacturers to further reduce capacity utilisation rates.

A temporary unplanned outage at small Midwestern plant – less than 30,000 tonnes/year – in December 2013 was said likely only to help briefly stabilise a market threatened by reduced acetone production and near-term hikes in upstream values.

However, many market participants expect balanced-to-snug conditions to continue well into the first half of 2014, with tightness potentially becoming critical as downstream demand for methyl methacrylate (MMA) ostensibly heightens in the second quarter with the US spring paint and coatings season.

PRICES
The US November 2013 barge contract settled broadly at 60 cents/lb, a 3.50 cent/lb drop from October, and the third straight monthly decline.

In the meantime, US truck acetone prices for December 2013 were proposed higher by 5-10 cents/lb from at least two domestic producers, one of which cited pressure from recently higher raw material pricing and acetone supply-demand issues.

However, November truck acetone values previously settled lower and in a wider range after foggy market conditions marked by weaker October feedstock values.

Pressure from rising propylene values will probably push prices higher in both the truck and barge markets, if only temporarily, in early 2014, sources said.

Also potentially pushing solvent-market acetone pricing higher, some sources said, is that 2014 phenol contracts were heard settling lower than expected because of pressure from imports.

Sellers will be keen to offset lower profitability from phenol, especially in the first quarter.

TECHNOLOGY
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.

In comparison, the older isopropyl alcohol route, in which alcohol is dehydrogenated to acetone over a metal, salt catalyst or metal oxide, continues to decline in use, and some are using a newer process involving the direct oxidation of propylene.

OUTLOOK
The acetone market in 2014 will be balanced to tight in the first half of the year, most sources said, easing only slightly and temporarily early in January because of the absence of some volume after a mid-December unplanned outage at Blue Island Phenol’s plant in Illinois.

Potential declines in the production of phenol due to poor domestic and foreign demand would likely further diminish US acetone supply, tightening the domestic market but prompting higher acetone import levels, sources said.

Stronger demand for acetone than for phenol will continue to pressure acetone supply. Year-over-year demand growth for acetone has been estimated by some at about 3% over 2013 volumes.

That estimate is slightly higher than the most recent forecast US 2014 GDP growth of 2.8%, according to the results of a survey released by the National Association for Business Economists (NABE) of economists released in mid-December 2013.

Acetone market participants generally see no significant opportunities that would prompt growth beyond GDP, but they do see a couple of headwinds.

Because of dismal phenol dynamics, more acetone imports will be needed to meet US demand. But those imports will compete with domestic product. Buyers also warn that US producers will continue to see “red ink” on phenol until there is some rationalisation of capacity in the US market to help correct overly long conditions.

By Larry Terry