China acetone prices surpass India, first time since 2014

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MELBOURNE (ICIS)–Spot acetone prices into China surpassed those into India for the first time since late August 2014, ICIS data showed.

Spot CFR (cost & freight) China acetone prices closed at an average of $587.50/tonne CFR China on a zero antidumping duty (ADD) basis, subject to import duty, in the week ended 22 July, following two weeks of rally, according to data compiled by ICIS.

In comparison, the prices into India were assessed at $582.50/tonne CFR India for the assessment week ended 20 July, ICIS data showed.

Against a backdrop of rising supply in Asia, the CFR China acetone prices climbed on the back of a confluence of renewed Asia-to-US arbitrage, resilient upstream propylene prices and the strong domestic market rebound ahead of the G20 Summit.

Raw material propylene prices in northeast have held well above $700/tonne CFR NE Asia since mid-April, ICIS data showed.

Acetone availability in Asia outside China has been boosted by capacity expansion in Thailand and South Korea, alongside increased phenol/acetone capacity utilisation in Singapore and Taiwan.

Mitsui Phenols Singapore may be in a position to raise its phenol/acetone output to around 90% capacity in August as its raw material supply gradually returns to normal.

And in Taiwan, Taiwan Prosperity Chemical Corp (TPCC) plans to maintain its phenol/acetone plant run rate at 60% capacity in August, after stepping up its output to this level in June.

Nevertheless, the underlying supply/demand fundamentals in Asia are garnering further support from continuing US demand for Asian material.

After selling 15,000-16,000 tonnes to the US for loading in July/early August, several Asian producers received further enquiries for August-lifting material.

Two northeast Asian producers have sold a combined 6,000 tonnes of acetone to the US for loading in August. Two other producers were heard to be undertaking discussions for sale to the US.

Tight acetone availability in the US has sustained US demand for imports from Asia, said an Asian phenol/acetone maker. 

US phenol supply tightened in June and July following two plant turnarounds in early Q2 and production issues in June stemming from feedstock delivery issues, ICIS Houston reported.

With the extended Asia-to-US arbitrage trade helping to rein in excess supply in Asia, domestic acetone supply in China is also expected to be crimped by scheduled maintenance and the upcoming G20 Summit in Hangzhou.

Petrochemical plants in major east China cities must cut output or halt operations ahead of the G20 Summit, which will take place on 4-5 September, to ensure improved air quality.

The order came from the municipal governments of the cities, which include Shanghai and Ningbo.

Shanghai Sinopec Mitsui Chemicals (SSMC) plans to shut down its plant between 1 August and mid-September.

Formosa Chemicals & Fibre Corp (FCFC) is expected to halt its operations between mid-August and early October, market sources said.

Sinopec Sabic Tianjin’s plant is scheduled to undergo routine maintenance between mid-August and late September, according to ICIS China production data.

Shandong Lihuayi also has plans to conduct a routine maintenance in August, ICIS China data showed.

An expected tightening in forward supply paved the way for an 18.3% spike in east China acetone prices in the three weeks ended 22 July, ICIS data showed.

This translates into an import parity price of $635/tonne CFR China (zero ADD basis, subject to import duty).

The CFR China acetone market run-up, and the comparatively low CFR India bids for material subject to high ADDs, are prompting some Asian acetone makers to direct their surplus volumes to China.

“Every producer is paying attention on which market would give them the best net back, whether it is China, or India, or the US,” an Asian trader said.

China, Asia’s biggest acetone market, imported 156,623 tonnes of acetone between January and May 2016, according to the country’s Customs data.

Spot CFR China acetone prices were assessed by ICIS at $575-600/tonne CFR China for the week ended 22 July while the prices on a CFR India basis were assessed at a $515-650/tonne CFR India for the assessment week ended 20 July.

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

Top image: paint brushes. Acetone is used as a paint thinner; Source (Photographer Image BROKER/REX/Shutterstock)

Additional reporting by Helen Han

By Trisha Huang