SINGAPORE (ICIS)--Spot domestic acetone prices in China may stay weak amid lacklustre activity in the market ahead of the country’s week-long Lunar New Year holiday.
On 8 February, prices in east China closed at Chinese yuan (CNY) 5,950-6,000/tonne ($940-948/tonne) ex-tank, down by CNY800-850/tonne from 10 January, according to ICIS data.
Some downstream producers have been running at reduced rates amid the government’s stringent environmental protection campaign, and poor sales, weighing down on acetone demand. Low production is expected to continue during the week-long holiday in China through to March.
China will be on holiday on 15-21 February for the Lunar New Year and Spring Festival.
On the supply front, although operating rates at some phenol/acetone plants in the northern parts of China have fallen to around 80%, a number of plants in the eastern part of the country are running at full capacity.
The average operating rate of domestic phenol/acetone producers was above 85%, according to data compiled by the China editorial team at ICIS on 2 February.
Despite the high rates, Chinese producers are lacking inventory as most of the cargoes are sold under contracts to traders and downstream producers.
Traders’ inventory, however, have been rising because of poor sales to downstream industries, with some of them offloading contract cargoes since the middle of January, exerting pressure on the spot market.
“Many traders are unlikely to finish sales of their February contract cargoes in response to poor downstream demand, and this will increase supply in March,” said an east China-based trader in Mandarin.
Port inventories in east China were at around 17,000 tonnes on 5 February, according to data compiled by the China editorial team at ICIS.
However, about 8,000-10,000 tonnes of fresh cargoes will arrive during the week-long Lunar New Year holiday, and this will increase the total inventories to over 25,000 tonnes, according to industry sources.
Supply in the domestic market is also expected to grow, with the scheduled commissioning of CNOOC Shell’s 350,000 tonne/year new phenol/acetone unit after the holiday. The plant is expected to produce about 10,000 tonnes of acetone per month.
Focus article by Yoyo Liu
($1 = CNY6.33)
Picture: Qingdao port in China. (Photographer: Yu Fangping/Pacific Press via ZUMA Wire/REX/Shutterstock)