Price and market trends: China acetone importers see price weakness

17 March 2014 00:00 Source:ICIS Chemical Business

Some Chinese importers’ outlook for acetone prices into China weakened because of slower-than-expected recovery in post-Lunar New Year holiday demand, along with heavy losses in the feedstock sector, market sources said on 4 March.

Spot acetone prices into China, the Asian benchmark, were assessed as stable-to-soft to average at $1,197.50/tonne CFR (cost & freight) China for the week ended 28 February, down by 0.2% week on week.

The downturn in raw material benzene and propylene prices amid a sell-off in the broader petrochemical market in late February, along with a post-holiday acetone inventory build, contributed to a soft outlook among some Chinese importers.

While many players had expected a busy phenol/acetone plant turnaround season to provide a floor for acetone prices in March and April, a build in port inventories, the sudden depreciation of the yuan against the US dollar, along with the decline in domestic acetone prices since the Lunar New Year holiday contributed to softer buying sentiment among the importers.

UPSTREAM WEAKNESS

In the upstream sector, spot benzene prices have slumped by 5.3% since early January to settle at an average of $1,271.50/tonne FOB (free on board) Korea for the week ended 28 February. Co-feedstock propylene prices lost close to 4% over the same period to average at $1,445/tonne CFR northeast Asia.

“Demand for acetone [after the Lunar New Year holiday] has not been as strong as we had anticipated. A weaker yuan is also pushing up the cost of US dollar-denominated imports, and it makes more sense now to trade locally produced acetone priced in yuan,” said a Chinese importer.

Domestic acetone prices in east China have declined by 4% since China reopened for business on 7 February to settle at an average of yuan (CNY) 8,900/tonne ($1,447/tonne) ex-tank on 28 February, according to Chemease, an ICIS service in China. Prices have tumbled by 7% since the start of 2014.

China Acetone

Major producer Sinopec Shanghai Gaoqiao slashed its offers twice in February, taking its total price cuts to CNY400/tonne by the month’s close.

“Margins for phenol/acetone producers have been strengthened by the recent fall in benzene and propylene prices, which may prompt some producers to ramp up their plant operating rates, resulting in higher acetone output,” the Chinese importer added.

Acetone port inventories at Jiangyin declined to about 26,000 tonnes in the week ended 28 February from roughly 30,000 tonnes in the preceding two weeks, according to estimates by market sources.

However, existing inventories will be bolstered by a further 10,000 tonnes of material due to arrive within days, market sources said on 4 March.

Moreover, the underlying supply-demand fundamentals may be weaker than market participants had expected, according to some market sources.

Even though several phenol/acetone plants in Asia will be taken off line for turnarounds, a number of downstream units will also be shut down in March, which could partially offset the supply constraints, said an Asian trader.

TURNAROUNDS

Phenol/acetone makers including Taiwan’s Chang Chun Plastics, Thailand’s PTT Phenol, Taiwan’s Formosa Chemicals & Fibre Corp (FCFC) and Japan’s Mitsui Chemicals all have plans to carry out maintenance in March.

Major Chinese producers Sinopec Shanghai Gaoqiao and Sinopec Beijing Yanshan will have overlapping shutdowns between February and April.

However, downstream units, including Lucite International’s 93,000 tonne/year methyl methacrylate (MMA) plant and Shanghai Sinopec Mitsui Chemicals’ (SSMC) 120,000 tonne/year bisphenol A (BPA) plant in Shanghai, will be shut down for maintenance in March.

In addition, a number of BPA units in Japan, Singapore, South Korea and Taiwan have either been shut down or will be taken off line in March.

South Korean producer LG Chem in mid-February shut down its 150,000 tonne/year BPA unit in Daesan. The plant is expected to stay off line until the end of March.

Taiwan Prosperity Chemical Corp (TPCC) has postponed the restart of its 100,000 tonne/year BPA plant in Linyuan to around mid-March from mid-January because of mechanical issues.

Japanese producer Mitsui Chemicals announced in February that it will close a BPA unit in Japan from March while keeping one BPA line at its Singapore facility off line for “several years”.

WATER REDUCER SHIFT

Demand from a key end use – aliphatic water reducers – may have been dented by the high cost of acetone against the price of water reducers derived from naphthalene, the Asian trader added.

Water reducers are concrete admixtures that help decrease concrete porosity and increase concrete workability and strength.

Despite the slower-than-expected demand recovery in certain downstream sectors, some players maintained a positive near-term outlook.

Some Chinese importers said that domestic acetone prices at around CNY8,800/tonne ex-tank is a historically “normal” price.

As domestic prices are nearing the cost of imported material, local prices are unlikely to decline further in the near term because importers are unlikely to offer further discounts and tolerate a further margin squeeze, the importers said.

“The market may still see moderate gains in March because supply will be tightened by the numerous overlapping phenol/acetone plant turnarounds,” said a separate Chinese acetone importer. China imported 488,700 tonnes of acetone in 2013, down 29% from the 690,200 tonnes purchased from abroad in 2012, according to the country’s customs data.

By Trisha Huang