US August barge acetone awaits direction from feedstock RGP

Focus article by John Dietrich

HOUSTON (ICIS)–US August barge acetone contracts are not expected to move much, tracking upstream prices, but the direction remains unclear, sources said on Thursday.

Market players said that upstream trading for refinery-grade propylene (RPG) has been thin in the mid-July to mid-August timeframe.

The previous period’s weighted average was around 25 cents/lb ($551/tonne), and spot RGP prices have been near that level since, although volumes traded have been low.

“Even though we have a weighted average already, everyone is waiting to see if we can get more of a feel for where RGP is,” an acetone market source said.

The stability in RGP has some acetone market players expecting a roll over from the July settlement at 40.5 cents/lb on a DEL (delivered) via barge basis.

Others have said there is room for a decline of up to 1 cent/lb from the July settlement, while some market players said a short-term increase in RGP could push August acetone up by 1 cent/lb.

Most market participants said the August contract settlement could be the end of current margins on acetone over RGP.

One major acetone buyer has a turnaround scheduled for September, and another is expected to take one in October.

“Those turnarounds will affect the market in terms of margins, but until then there’s no reason for them to come down,” another source said.

This could increase acetone supply to a more balanced position and move barge acetone contracts down by more than RGP movements in the third quarter.

Others have said that acetone supply in the US is unlikely to soften enough to lower margins unless Asian import material becomes more attractive.

Additionally, a drop in acetone margins would likely lead to a decline in production, as high margins have allowed some US producers to keep production rates up.

This has necessitated selling co-product phenol into the export market at parity or discounts to feedstock benzene.

“The only reason Asia is buying US phenol is the price,” a trader said. “If that goes away, exports go away.”

Barge acetone contracts have also been supported throughout 2017 on strong downstream demand for methyl methacrylate (MMA), which has been short globally for most of the year.

Demand from the bisphenol A (BPA) sector has also been strong in the US, further supporting acetone prices.

The US barge acetone contract is settled between two large producers – INEOS Phenol and Shell Chemical – and the three largest buyers – Dow Chemical, Evonik and Lucite.