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→ ACETONE REPORT
An Analysis by Garrett Velarde
The MMA Producer-Monthly Barge Contract for April settled at $0.485 per pound. This represents a $0.0525 per pound decrease from March to April. This settlement is the first drop since November to December of 2016. Seemingly, we are roughly where we were in February. Ah, lovely price cycles.
The refinery grade propylene (RGP) spot weighted average decreased by approximately $0.05 per pound from mid-month March to mid-month April. RGP reached its high in an early March trade. RGP has since retreated 56% in pipeline for the latest trades for May delivery. The heavier RGP volume deals done in the higher 30’s held the March to April mid-month weighted average up despite the RGP deals done in the 20’s before the April acetone settlement was complete. Polymer grade propylene (PGP) is back to the normal
$0.10 per pound premium to RGP.
Acetone supply and demand has plenty of dynamics to deal with currently. The USA supply remains balanced to snug. Domestic phenol operating rates remain relatively low, thus keeping acetone output tame. Two different producers had planned turnarounds in April at different times. On the
supply end, all the MMA units were running for April. One in particular was building inventory ahead of a planned turnaround this month. Demand remained strong for bisphenol-A (BPA) and for the aldol solvents. The global picture of acetone continued the same sentiment from last month. China
Main Port (CMP) acetone plus duty and freight softened around $0.04 per pound from last month. With duty and freight, acetone from Asia can land here in the USA at approximately $0.40 per pound. (Small side note: The Plaza Group has been asked over the last month why CMP
pricing is used as a gage for Asian acetone to get to the USA. After all, China is a net importer of acetone, which predominantly comes from South Korea and Taiwan. Well, South Korea and Taiwan prefer the sizable off-take China provides and prefers the shorter shipping route. South Korean and Taiwanese product does make its way to the states but tends to do so based off either a spot price
or something linked to CMP pricing.) European acetone continues to be tight in May. One of the larger producers just completed its turnaround last week and is heard to be increasing its output. Europe’s pricing is expected to soften over the course of May with Asian parcels on the water no doubt heading that direction. RGP’s sharp decline over mid-March to early April likely scared USA
spot acetone buyers for Asian material.
The RGP decline has kept spot truck and rail buyers hesitant. The Distribution Buyer has softened over the last six weeks. The April 1st range was from $0.60-0.65 per pound; the mid-April range was $0.55-0.62 per pound; the May 1st range came in at $0.53-0.58 per pound. Despite the fall in Distribution, spot acetone pounds remain limited. A good data point to support this is the 24 million pound difference in import/export data over the first 2 months of 2017 versus 2016. The USA lost approximately 10 million pounds of imports while sending out approximately 14 million pounds of additional exports.
The author of this monthly update predicted April’s settlement between a nickel and dime down. We
barely made that window. For May’s settlement, the full descent of RGP will be felt. We will predict a May MMA-Monthly Barge settlement between $0.39-0.42 per pound. Spot acetone buyers will experience higher prices, as the arbitrage will remain closed for the next few months. Domestic producers will not be there to bail these buyers
because phenol is lackluster.
ISSUE: MAY 2017
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