US phenol sellers could spark pressure from Asia acetone sellers

26 June 2017 20:46 Source:ICIS News

cargo ship in ChinaFocus article by John Dietrich

HOUSTON (ICIS)--Continued high volumes of phenol exports from the US into Asia could spark Asian sellers to increase exports of co-product acetone into the US.

Sources said at least one US phenol producer has been consistently moving phenol into Asia, at levels heard about 2-4 cents/lb ($44-88/tonne) below upstream benzene prices.

These exports have worked for the seller because that has allowed it to boost acetone production, and acetone margins over feedstock refinery-grade propylene (RGP) are around 10-15 cents/lb or more.

“The Asian producers are not happy with this trend,” a US source said. “Now they’re looking to move acetone into the US in response.”

If Asian acetone sellers are able to move large volumes of product into the US, sources said that could move supply to a balanced-to-long position and push down on margins.

“Acetone margins only got to where they are because acetone was tight early in the year,” a US buyer said. “Supply should have improved enough to knock them back down.”

However, US acetone has a cost advantage relative to Asian product, owing to its usage of a cheaper RGP as a feedstock, compared with chemical-grade propylene (CGP) in Asia.

This would force Asian acetone sellers to offer product into the US below propylene prices in Asia, which are around the upper-30s cents/lb.

“There is really no way for Asian sellers to go below propylene,” a US source said. “They can’t lose the money.”

A US trader said, however, it is receiving material for June/July loading around 29-31 cents/lb on a CFR (cost & freight) Houston basis for August arrival.

Other sources said they had not heard any offers at those levels, and were still seeing Asian acetone prices around the 33-34 cent/lb level on a CFR basis.

Even with the lower-priced imports, sources said that expected cutbacks at SABIC’s Mount Vernon phenol/acetone plant in Indiana will keep the US acetone market balanced to snug.

SABIC uses most of the phenol and acetone at the plant to make bisphenol A (BPA), which it uses to make into polycarbonate (PC), which leaves it long on acetone.

The company is experiencing production issues at its Burkville PC plant in Alabama, which is putting pressure for cutbacks at Mount Vernon.

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

By John Dietrich