China acetone at 17-month high; supply gain may curb upside

17 October 2016 04:52 Source:ICIS News

Chris Robbins / Mood Board/REX/Shutterstock

MELBOURNE (ICIS)--The upside to China’s spot import acetone prices may be limited as the restart of domestic plants restores supply, market participants said on Monday.

Acetone prices have accumulated 25.6% of gains since early July to close at an average of $700/tonne CFR (cost & freight) China on a zero antidumping duty (ADD) basis, subject to import duty, according to data compiled by ICIS.

The prices were last higher in early May 2015, ICIS data showed.

The gradual resumption of operations at China-based phenol/acetone plants is likely to curb the further upside to both the yuan-denominated domestic and US dollar-denominated CFR China acetone prices in the near term, the market participants said.

The possible end-October restart of Shell’s Pulau Bukom cracker is also expected to restore acetone availability from Singapore.

At the same time, the continuing Asia-to-US acetone arbitrage may help to limit the CFR China acetone price downside. Renewed strength in the upstream propylene sector is likely to lend additional support.

End September/early October meant the restart of some China-based phenol/acetone plants from scheduled maintenance.

The average phenol/acetone capacity utilisation rate in China is at around 60% capacity, up from below 50% during September, according to estimates by market participants.

* According to market participants

Three China-based phenol/acetone plants remain off line. 

Sinopec Shanghai Gaoqiao on 10 October took its plant off line for maintenance. The plant is expected to stay down until 25 November, according to production data compiled by ICIS China.

Separately, operations at Formosa Chemicals & Fibre Corp (FCFC)’s Ningbo plant are scheduled to be resumed on around 20 October, following the completion of a turnaround.

Meanwhile, Shandong Lihuayi was in the process of resuming its plant operations following an overhaul, earlier than the original schedule of 31 October, ICIS China production data on 14 October showed.

The tail-end of the peak turnaround period of August to October in China and the anticipated restoration in domestic acetone cargo availability are fomenting a subdued outlook among Chinese importers.

“With more plants restarting in this month, we expect to see some pullback in [domestic] acetone prices in the near term,” a Chinese acetone importer said.

Some importers’ expectation of a near-term domestic market softening has also curbed their interest in booking end-October/November supplies at what they perceive to be elevated asking prices.

“We are not buying anything for the time being,” a separate Chinese importer said.

The yuan-denominated domestic prices of acetone in east China settled at an average of yuan (CNY) 5,925/tonne ex-tank on 14 October, marginally higher than the 30 September close of CNY5,900/tonne ex-tank. The prices were not assessed on 7 October because of the National Day holiday in China.

Inventories at Jiangyin, a key gauge of supply, also registered post-holiday gains, inventory data compiled by ICIS China showed.


Stockpiles rose to 26,000 tonnes on 14 October from 19,500 tonnes on 30 September, according to ICIS China inventory data.

Mitsui Phenols Singapore on the weekend of 1-2 October reduced its phenol/acetone output in the wake of a force majeure declared by Shell on 29 September.

The phenol/acetone maker hopes to restore its production level at the end of this month, with the potential end-October restart of Shell’s Pulau Bukom cracker, a company source at Mitsui Phenols Singapore said on 11 October.

Despite the anticipated improvement in domestic and southeast Asian supply, continuing Asia-to-US arbitrage is helping to soak up the surplus acetone in northeast Asia.

The export trade is continuing, even though some market participants had noted a slackening in American demand stemming from the buyers’ reluctance to carry high year-end inventories.

To date, several northeast Asian producers are heard to have sold a combined 10,000 tonnes of acetone to the US for loading in November at $650/tonne FOB (free on board) NE (northeast) Asia.

In the upstream sector, the mid-point of raw material propylene prices in northeast Asia rallied by nearly 3% for the week ended 14 October, paring a 3.7% fall in the two weeks ended 30 September, ICIS data showed.

China, the world’s second biggest economy, is Asia’s largest buyer of acetone. Despite the significant domestic phenol/acetone capacity expansion in 2015, the country’s import demand has remained resilient so far in 2016.

Below-capacity phenol/acetone plant utilisation rates in China, estimated by market participants at no higher than 70% capacity for most of 2016, has sustained the country’s import appetite.

China imported 274,745 tonnes of acetone between January and August 2016, a 1.2% decline from the first eight months of 2015, according to the country’s Customs data.

(Top Image: Chris Robbins / Mood Board/REX/Shutterstock)

Additional reporting by Helen Han

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