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An Analysis by Garrett Velarde


The MMA settlement for August was unanimously decided at $0.5375 per pound. This represents an increase of $0.0075 per pound from the July settlement. Half a year of rising settlements is on the line in September. Although propane is backwardated at the moment, residential and commercial
properties, especially in the Northeast, still need to be heated in the winter, which is right around the corner.

The refinery grade propylene (RGP) movement in August was factored a bit more in for the MMA Settlement than last month. RGP pricing increased approximately $0.01 per pound on a 45-day volume-weighted average. This RGP factor of 0.75 used for the MMA settlement in August is much more
customary. RGP has continued to gain momentum in late August and early September. We can chalk this up to some struggles within the propane dehydrogenation (PDH) units. Even with the PDH struggles, polymer grade propylene (PGP) has come off about a nickel since the start of August. The delta between RGP and PGP rests around $0.10 per pound. Most RGP spot deals are constructed now by backing out from the spot PGP price. The reason for this is the lack of RGP buys reported by the largest purchaser of the product. We expect the current delta to stay around this value moving forward.

Acetone imports remained stabilized in July and within the range of what is needed to balance the domestic market. Approximately 17 KT of acetone arrived on our shores in July. At the moment, the arb is open to the USA from both Europe and Asia. Continued strong phenol demand remains the story for acetone. Domestic producers are gaining ground in getting their phenol prices up by demanding a
larger benzene adder. Increased phenol exports this year (up 5-7%) also entice producers to keep production ramped up. The acetone must find a home though to continue the phenol production.

The recent announcements by both China and US on increased tariffs need to be addressed in this report. Acetone, although listed on the tariff report, imports and exports between the countries are inconsequential. Approximately 6% of USA exports of acetone make its way to China and less than 1% of what the USA receives originates in China. Phenol, also listed, is a different story though.
Approximately a quarter of USA phenol exports go to China. Not only do the tariffs pose a threat, but also the anti-dumping allegations made by China may impose further percentage increases. This will be important to watch
as this could have a dramatic effect on operating rates here in the USA in 2019 and beyond.

The domestic truck and rail market has not seen any announced increases despite RGP staying strong.
We expect RGP to hold strong, which could lead to announcements for spot acetone increases in the
truck and rail sector soon. The Midwest continues to be a very competitive region in the truck and rail market.

We predicted August to have a small hike in the MMA settlement. Even a blind squirrel finds an acorn every now and then. We feel September RGP stays around where it is, which is slightly higher than where it was in August. With that in mind, we call for another small hike in the September MMA settlement.

Hope everybody had a wonderful Labor Day weekend!


ISSUE: September 2018


The Plaza Group · 1177 West Loop South, Suite 1450 · Houston, Texas 77027

Phone (713) 266-0707 · Fax (713) 266-8660 · Orders (800) 876-3738 · Email contact@theplazagrp.com


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