Chemical Profile: Europe acetone

07 March 2014 10:50 Source:ICIS Chemical Business

The main use of acetone, accounting for over 25% of consumption, is the manufacture of acetone cyanohydrin (ACH), a feedstock for methyl methacrylate (MMA), which is primarily polymerised to make polymethyl methacrylate (PMMA). Another major and fast growing derivative is bisphenol-A (BPA), a feedstock for the production of resins and plastics, including polycarbonate (PC).

Other applications include solvent applications (varnishes, lacquer, cellulose acetate fibre, cellulose nitrate, and as a carrier for acetylene in cylinders), higher molecular weight glycols and alcohols, methyl isobutyl ketone (MIBK) and methyl isobutyl carbinol (MIBC) and miscellaneous chemical uses (manufacture of pharmaceuticals and chloroform).

Demand has continued to be affected by poor macroeconomics in Europe. The most significant end markets include plastics (PMMA and PC), coatings resins and solvents. These have been impacted by macro trends such as slow housing, automotive and white-goods sales across Europe. The ICIS consulting database recorded a 1.3% rise in European consumption in 2013, with a similar 1.4% forecast in 2014.

Traditionally, supply is to a large extent determined by demand for co-product phenol, which was seen as the more profitable molecule. Weak phenol end markets in Europe and increased Asian downstream competition have meant European plants are operating at low rates of 60-65%. This situation has persisted for a couple of years and has in turn restricted the supply of acetone.

Manufacturers were recently heartened by some announced phenol/acetone closures in other regions, including Blue Island Phenol in Chicago, US, and Mitsui Chemicals/ Idemitsu Kosan in Chiba, Japan. In addition there was some improvement in demand for phenol, as key end markets like BPA and resins saw stronger demand and less Asian competition. These brought hope that the global phenol market could be brought into balance, allowing European manufacturers to increase operating rates.

Acetone MMA contract prices are freely negotiated between major buyers and sellers. Prices largely follow key raw material propylene, although with more muted movements. Like spot prices, contract prices had a double peak in 2013: in March at €955/tonne and in September at €956/tonne. Contract prices in 2014 have been stable at €923/tonne, as propylene has been unchanged.

Spot prices are more volatile with strong seasonal movements: 2013 saw a double peak – in February at €1,150/tonne and in September at €1,010/tonne. The spot price reached a high of €1,000/tonne in early February 2014, due to an unexpected outage in Italy, and some shipping delays for product from South Africa, Spain and Finland. However the upward movement has since stalled, with supply improving. In addition buying interest is still said to be limited, with limited seasonal solvent demand as yet.

Around 83% of acetone globally is made through the cumene route, using propylene and benzene as feedstocks. South African producer Sasol makes acetone via coal gasification.

One older technology is the fermentation of acetone-butanol-ethanol using bacteria, which was used in World War I to help with cordite production. Some work is being done to commercialise fermentation using renewable, green feedstocks.

Near term, the majority of market players see further volatility, thanks to continued low operating rates and the potential for seasonal demand for solvents into coatings. Phenol demand should continue to be the main determinant of operating rates for acetone. Any further recovery of downstream phenol demand could lead to the acetone market coming more into balance and ease the price volatility seen in recent years.

Some market participants see a need for acetone prices to rise in relation to phenol, to support the industry in the face of falling phenol profitability. However acetone buyers in the MMA industry remain unhappy with this, as their end-product PMMA often directly competes with PC – a major downstream product in the phenol chain.

Threats to the acetone industry include alternative MMA production methods, based on cheaper ethylene feedstocks. These include Lucite’s alpha process which uses ethylene as a feedstock and the I-C-4 process which involves the direct oxidation of isobutylene. Lucite has already opened one Alpha plant in Singapore and a second one in Saudi Arabia is due by 2016.

Other threats include a move away from solvents in applications like coatings and a consumer rejection of BPA due to potential health concerns, and environmental moves away from solvents.

By Rhian O'Connor