Feeds, tightness push on US Feb acetone contracts

Focus story by John Dietrich

HOUSTON (ICIS)–US acetone contracts for the barge and truck/rail markets are facing upward pressure from tight supply and an increase in feedstock costs.

The tight supply is largely the result of one ongoing plant turnaround and two others scheduled for the March/April time period.

Imports from Asia have also slowed significantly on a closed arbitrage window, and operating rates are unlikely to increase in the US because of a lack of margin growth for acetone co-product phenol.

Feedstock costs from refinery-grade propylene (RGP) appear likely to be assessed up around 15 cents/lb ($331/tonne) for the February period.

Sources said that by Wednesday, pricing was already starting to increase in the truck/rail acetone market and was expected to do so throughout the month.

January pricing closed at 40-45 cents/lb on a pre-discount delivered (DEL) basis.

By mid-February, sources said truck pricing was closer to the upper 40s cents/lb to low 50s cents/lb on the same basis.

Additionally, several sellers have made separate price increase nominations for a further 10 cents/lb by the end of February.

Buyers and distributors said it is likely that a portion of the increases will find traction, which could put pricing at the close of the month into the 55-60 cent/lb level.

However, it could take through the first half of March for pricing to uniformly reach that level, sources said.

Although demand is mostly described as steady, buyers and sellers said the truck/rail market could support higher pricing.

In the barge market, demand remains strong, with sources saying buyers are taking all or almost all of their contractual offtakes.

The January barge acetone contract settled at 35 cents/lb on a DEL basis, and sources said February could see an increase of around 15 cents/lb or more.

Sources said producers are pushing for a larger increase to allow for some margin expansion, given tightness in supply and the lack of expected opportunity to import Asian product.

Supply for large buyers is also not expected to be at desired levels until the end of the first half of 2017, owing to the turnarounds and limits to increased operating rates.

Major US acetone producers include AdvanSix, Altivia, INEOS Phenol, Olin, SABIC and Shell Chemical.