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An Analysis by Garrett Velarde


The MMA Settlement for December was unanimously decided at $0.3625 per pound. This represents a decrease of $0.0775 per pound from November’s settlement. Over the last two months, the settlements have come down nearly $0.185 per pound and the latest settlement is the lowest since January 2017. Will the bearish energy price landscape continue to take its toll on the MMA settlement going into 2019?

The refinery grade propylene (RGP) movement in December was factored near a 0.9 level for the MMA settlement just like November. RGP pricing decreased approximately $0.09 per pound on a 45-day volume weighted average compared to the previous 45-day window. RGP hit its low just above $0.20 per pound in December after seeing annual highs around $0.45-47 per pound in early October. RGP has moved up a notch since hitting the bottom in early December. Polymer grade propylene (PGP) also saw a slide in December with propane dehydrogenation (PDH) units reportedly running well. The slide in crude oil in late 2018 made non-ethane feeds more attractive thus outputting more propylene. OPEC’s promise of production cuts will need to be seen for crude oil pricing to stay strong (strong meaning where it is now). There is a lot of pipeline relief for stranded crude, natural gas, and NGL’s within the USA coming online this year. If these pipelines are put in service and OPEC does not hold on to their promise, we expect to see propylene following a tumbling crude oil price.

Acetone imports in November continued to be strong, albeit not nearly as strong as October’s 30 KT. Approximately 18 KT arrived on the USA shores in November. December’s lower MMA settlement should help close the arbitrage window from both Asia and Europe. China Main Port (CMP) and European export prices moved only a small fraction down compared to the movement down in the USA. We expect for December’s imports to the USA to be lower than November’s. Even with a low December total, 2018 imports to the USA are projected to be around 75% higher than 2017 import levels. USA export levels are projected to slightly decrease from 2017 to 2018 (Me scratching head?).

The domestic acetone truck and rail market continues to see congestion and lots of sellers. However, with the drop in the MMA settlement, spot and contract are coming more in line again. Demand in December appeared quite strong during a month where buyers are usually draining their inventory for tax purposes. Phenol production will be key to watch in 2019. Will the tariffs for export to China materialize? If the tariffs do materialize, we expect domestic operating rates to retreat from the low to mid 80% levels currently seen.

We predicted in early December that the MMA settlement would come down at least $0.035 per pound. While not a bold prediction, it held true nonetheless. Crude oil pricing will continue to be the weight tipping the propylene seesaw moving into 2019. We will call for the January MMA settlement to be +/- $0.015 per pound from December’s settlement. Happy New Year! We wish all a very safe and prosperous 2019.


ISSUE: January 2019


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

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