Europe highest priced region for acetone spot as rally continues on short supply

Author: Heidi Finch

2020/07/17

LONDON (ICIS)--Europe acetone spot prices continue to spike this week, lifting prices to the highest level globally, on the back of limited spot supply and short covering needs.

Mid-point prices have risen by around 64% since the price rally began in early June, triggered by short prompt supply.

The shortfall in supply has been linked to cumulative effect of existing output cuts tailored to low phenol demand at the expense of co-product acetone, a lack of currents imports  and a recent flurry of export business to Asia and the Americas.

Preparation for forthcoming turnarounds is also likely to be further impacting merchant acetone spot availability.

Some full truck business bookings and price indications were at €900/tonne FCA or FD or in some cases at €1,000/tonne Free Carrier (FCA) or FD as a minimum and up to around €1,100/tonne FD for prompt/July, if not slightly above in certain cases for early August delivery.

As the spot market is practically dry for July, any spot demand that needs to be covered, is at a significantly higher price, that is, if material product can be sourced at all, with any spot volume being snapped up immediately.

Some acetone volume was unexpectedly freed up on one occasion, believed to be due to a downstream problem, but it was immediately sold into distribution at €1,000-1,050/tonne FCA and re-sold at closely around €1,100/tonne FD end user for very prompt delivery.

For deliveries during August, spot prices are also being mooted well above €1,100/tonne FD for truck business, although there is no evidence of any business concluded at this level and it will depend on demand evolution over the summer.

Spiking European spot prices are likely to attract imports, although this is unlikely to  have a physical effect for a few months.

A spot export cargo of 3,000 tonnes is being offered from South Korea to Europe for September arrival.

Acetone export activity was lacking this week, as it makes more sense to sell domestically in view of the price spikes in Europe.

Europe acetone spot prices  have surpassed the other regions in euro terms, following a reversal in trend, after recent highs in China in April/May.

China acetone spot prices have trended down since then, as the previous price rally stalled buying activity.

Last week, China acetone spot prices were assessed at $930-990/tonne CFR, equivalent to €802-855/tonne CFR at the time of writing.

Ongoing tight supply are keeping US acetone prices steady to firm, with prices at 42-46 cents/lb last week -equivalent to €798-876/tonne at the time of writing, but there is some discussion that prices may have reached a ceiling.

Some US acetone buying interest was noted for European product for August shipments, but there was no evidence of any bookings made, amid a gap between buy-sell indications in a strongly rising European market.

After a low April and May, the downstream automotive sector is gradually recovering from the coronavirus impact, aided by lockdown easing and government stimulus packages.

Construction activity is picking up, on lockdown easing and favourable weather conditions.

Demand for protective plastic sheets continues to be boosted by coronavirus related requirements.

Some upcoming derivative methyl methacrylate (MMA) turnarounds, the main summer holiday period in Southern Europe and downstream affordability woes in a fragile environment, especially in view of high spot prices, may dilute activity to some extent.

Focus article by Heidi Finch

Additional reporting by Tarun Raizada and Angeline Soh

Photo by Jochen Tack/imageBROKER/Shutterstock