HOUSTON (ICIS)--US January barge acetone contract talks are facing a wide array of pressures, but sources said a rollover is unlikely given the intensity of the factors.Photo by Jochen Tack/imageBROKER/REX/Shutterstock
The impending idling of Shell Chemical’s Phenol 3 unit, which produces 144,000 tonnes/year of acetone, is the biggest long-term factor.
The idling was originally set for mid-January but has been delayed until mid-February. This has added some unanticipated supply length to the market.
However, even with other US producers expected to boost rates slightly, sources said they expect US buyers will be somewhat reliant on imports from Asia.
Although sources expect Asia to have ample export supply, sources said there could be more volatility than expected because of plant cutbacks in China tied to environmental restrictions.
Large import volumes already made their way into the US following Hurricane Harvey, and another large volume moved over following the news from Shell.
That has led to longer-than-expected supply in the US, which sellers have argued should lead to softer pricing for January barge contracts.
Producers have said that demand levels remain strong, as methyl methacrylate (MMA) and bisphenol A (BPA) producers are running at full rates.
Demand is strong for those products because of global tightness, incentivising buyers and consumers to restock inventories.
US acetone producers said they are also pushing for a January increase as upstream refinery-grade propylene (RGP) values have increased.
Sources said RGP prices on a weighted average basis are up by at least 2.0-2.5 cents/lb through mid-January, and could increase further.
This is because of propylene tightness in the US stemming from delays in the start-up of Enterprise Products’ propane dehydrogenation (PDH) unit.
One acetone seller said that the December barge contract represented a decline in margins for acetone over RGP.
Market sources said they expect producers to push for overall margin expansion throughout 2018 because of the Shell idling.
December barge acetone contracts increased by 0.75 cent/lb to settle at 49.75 cents/lb on a DEL (delivered) basis.
The US barge acetone contract is typically settled between two large producers – INEOS Phenol and Shell Chemical – and the three largest buyers – Dow Chemical, Evonik and Lucite.
Focus article by John Dietrich