US barge/truck acetone spread flips on oversupply

Source: ICIS News


HOUSTON (ICIS)--A large supply and inventory overhang have narrowed the spread between large-buyer barge acetone and medium- and small-buyer truck/rail acetone.

Bottle of acetone (Photo by Jochen Tack / imageBROKER/REX/Shutterstock)

Based on April contract settlements, truck/rail acetone in the US Gulf is around 4 cents/lb ($88/tonne) lower-priced than barge material on a net basis.

Typically, barge material is at least 5-10 cents/lb lower-priced, based on its larger volumes and steeper discounts.

The spread flipping follows April truck/rail acetone being assessed down by 3 cents/lb from March contracts, putting it at 38-44 cents/lb on a pre-discount DEL (delivered) basis.

Midwest truck/rail acetone fell by 2 cents/lb, putting them at parity with US Gulf levels.

April barge acetone contracts settled at 45 cents/lb on a pre-discount delivered (DEL) basis.

US barge acetone prices in April were driven higher by upstream refinery-grade propylene (RGP), which rose about 2.5 cents/lb.

US acetone producers have more length than desired on acetone but are not facing as intense pressure to draw down inventories.

“Do we have more than we’d like? Yes,” a producer said, “but we have an optimistic view of the market, and we can afford to wait for it to come around.”

Most market players expect that acetone supply in the US will tighten throughout May and June and move the US into a tight position as it feels the full effects of the late-February idling of a major unit.

The long supply and inventory overhang in the US has been driven by imports, largely going toward traders and truck/rail distributors.

Sources said that with those sellers having most of the overhang, they have been pressured to move volumes via truck and rail, having limited opportunities for barge sales.

This is because most barge-level US buyers in the US are largely contracted, although several reported receiving deals for spot barges below contract prices in the first quarter.

Traders and distributors have looked to the export market, but pricing was in the high-20s cents/lb in March and has moved up to the low-30s cents/lb in April.

Additionally, demand for product from Asia and South America has been soft, limiting opportunities.

Major US acetone producers include AdvanSix, Altivia, INEOS Phenol, Olin, SABIC and Shell Chemical.

Focus article by John Dietrich