Price and market trends: India acetone may resist China pull

29 November 2013 17:30 Source:ICIS Chemical Business

Rising imports towards the end of November could keep prices from increasing as much as in the nearby China market

Spot acetone prices in India may not track the sharp gains seen in the key Chinese market, as supply will increase given a hefty volume of imported material hitting its shores by the end of the month, industry sources said on 21 November.

Acetone is a by-product of phenol

Copyright: Rex Features

On 20 November, acetone was assessed at $1,100-1,130/tonne (€825-848/tonne) CFR (cost and freight) India, up by $5/tonne at the high of the range amid limited discussions for December shipments.

The low end of the range represents prices of cargoes subject to anti-dumping duties (ADDs), while the high end represents the ADD-exempt cargoes.

“Prices in India should go up, as December arrivals are significantly lower than what India usually imports every month,” an Indian importer said.

Around 5,500 tonnes of acetone have been booked for November shipment, much lower than India’s monthly import volume of 6,500-8,000 tonnes, market sources said.

However, this month, as much as 10,000 tonnes of acetone booked in October are expected to reach India.

Hefty import arrivals amid stable demand could weigh on importers’ price ideas for northeast Asian cargoes, market sources said.

“It is difficult for Indian prices to go up, as a lot of October shipments will arrive at the Indian ports by end-November, and [the] market will have enough product available,” an Indian importer said.

While domestic prices two weeks prior rose by Indian rupees (Rs) 2.50-3.00/kg ($40-48/tonne) to Rs79.50-80.00/kg ex-tank, the increase was largely on account of currency fluctuations against the US dollar, and a temporary tightness in acetone supply in the market, he said.

The tight supply may not last long, and may prompt an adjustment in prices back to their previous levels, the importer said.

Offers for December shipments from South Korea at $1,100/tonne FOB South Korea, equivalent to around $1,170/tonne CFR India, drew subdued response. Indian buyers showed little interest for cargoes priced above $1,040-1,050/tonne FOB South Korea or $1,110-1,120/tonne CFR India.

South Korean cargoes are subject to additional ADDs of $67/tonne for consumption in the Indian domestic market. These cargoes are typically sold to advance licence market or the finished products exports sector – which is exempt from the ADDs – at prices that are lower by around $20-30/tonne than the ADD-exempt Taiwanese cargoes.

Acetone, which is used as a solvent in the manufacture of pharmaceuticals and industrial coatings, is a by-product of phenol. Weak phenol demand for a significant portion of this year has led to producers operating at reduced rates for much of 2013, capping acetone availability across Asia.

The recent surge in Chinese demand, exacerbated by low inventories in local markets and firmer feedstock benzene costs have led to steep price spike in the Chinese markets.

Regional acetone producers have started increasing their allocation to China, where better prices can be realised, market sources said.

In the week ended 20 November, discussions for December shipments to India were muted, as most producers had no more cargoes to offer, having sold out their stocks to China, some at higher prices, market sources said.

On 15 November, spot acetone prices in China were assessed at $1,185-1,190/tonne CFR China, up by $35-40/tonne week on week on the back of low inventories, robust downstream demand, higher domestic prices and rising benzene costs.

A Taiwanese producer said it was sold out in the previous week and has no cargoes to offer to India in the weeks to come.

The producer usually sells 5,000-5,500 tonnes a month of acetone to India, but sold only 3,500 tonnes for December shipment as it increased shipments to China. It was heard to have sold around 3,000 tonnes additional spot cargoes to China, although the exact figures could not be confirmed.

“We have no spot availability for December, since China is the key market for us, not India,” a source at another Taiwanese producer said.

This producer did not offer spot volumes to India in November and will again skip making December offers.

Offers from Thailand are also scarce to India because of improved Chinese demand.

Selling indications for limited volumes of December-shipping southeast Asian cargoes were heard at $1,150-1,160/tonne CFR India. These cargoes are subject to additional ADDs of $147/tonne when sold to the Indian domestic market, but ADD-exempt when sold to advance licence buyers.

By Veena Pathare