India acetone market remains muted amid uncertain rupee

By Veena Pathare

SINGAPORE (ICIS)–Spot discussions for acetone imports into India in September remains largely muted, as most importers continue to watch the slide of the local currency against the US dollar, market sources said on Tuesday.

Spot acetone prices in India were assessed at $1,070-1,100/tonne (€813-836/tonne) CFR (cost & freight) India in the week ended 28 August, unchanged from the previous week, according to ICIS data.

Discussions for September-loading imports have remained largely subdued from end-August, as the depreciating Indian rupee pushed many importers to the sidelines. 

The decline in the rupee against the US dollar weighed heavily on acetone demand, as buyers opted to wait and see the near-term trend in the exchange rate before booking their shipments.

“There are no buyers in the market today. Everybody is watching the rupee. So it is very difficult for us to buy a cargo with no end-users in sight,” a major Indian phenol/acetone trader said.

The Indian rupee has depreciated by over 25% against the dollar since 1 April 2013, affecting all commodity markets in the country.

The recent slump to over Rs68 to a dollar in end August led most importers to suspend all discussions and monitor the volatile currency.

Furthermore, ample arrivals in end July and August forced end-users to purchase from the local markets, rather than sourcing imports.

More than 19,000 tonnes of acetone booked in July and August began arriving at the Indian ports from end July onwards.

These volumes, which are significantly higher than the country’s usual monthly acetone imports of 6,000-7,000 tonnes weighed heavily on import demand for September lots and capped buying ideas of importers, despite tight supply throughout Asia.

Taiwan cargoes for September shipping into India, exempt from payments of anti-dumping duties (ADDs), were offered at $1,050/tonne FOB (free on board) Taiwan, equivalent to $1,100-1,110/tonne CFR India amid tight supply in the Asian markets.

Producers opted to maintain firm offers for acetone lots as they continued to operate their units at reduced rates because of weak phenol demand.

The supply of acetone, a by-product in the manufacture of phenol was consequently affected.

However, these offers were heard to have found very limited response from Indian importers, on account of the weak rupee.

According to regional traders, it was difficult to conclude purchases for cargoes whose prices fluctuated significantly between the time of booking and their arrivals into the south Asian country, which is anywhere between 15-25 days.

Meanwhile, Indian end-users that mainly comprise pharmaceutical firms chose to purchase from the local markets, amid ample supply and reduced exposure to the volatile rupee.

“It is better for us to buy ex-tank cargoes from Kandla rather than source imports at this stage as we can buy smaller volumes to cover immediate requirements,” a major acetone user said.

According to market sources, ex-tank acetone prices ranged at Rs80.00/kg ($1.19/kg) to as high as Rs85.00/kg in Kandla, one of the major ports on the west coast of India.

Ex-tank prices have moved almost on a daily basis since end August, and on some occasions more than once in a day tracking the rupee movement.

While ex-tank prices also increased in tandem with the weak rupee, end-users said that buying from the local market reduced their exposure to the fluctuating rupee.

($1 = Rs67.20)

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