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ACETONE REPORT

An Analysis by Garrett Velarde

 

The MMA settlement for October was split between $0.545 and $0.5485 per pound, thus an average of $0.54675 (woof, that’s a lot of decimal spots). This represents an increase of $0.00425 per pound from September’s settlement. This was the first split settlement since December 2016. Are we at the apex after 7 straight months of rising settlements?

The RGP (refinery grade propylene) movement in October was again factored near that 0.7 level for the MMA settlement. RGP pricing increased approximately $0.0065 per pound on a 45-day volume weighted average compared to the previous 45-day weighted average. Polymer grade propylene (PGP) and RGP have since fallen off. As of yesterday, both PGP and RGP have come down over $0.10 per pound while the gap between the different grades of C3 narrowed to approximately $0.11 per pound. This drop in pricing for RGP is especially interesting since Eastman made a public statement indicating they were in the market to purchase 150,000 metric tons of RGP to run through their splitters to upgrade to PGP. It is rumored two other companies would also be in the market to purchase a big slug of RGP to also run through their own splitters. This amount of RGP bid for in the market should signal a price increase, but we have yet to see any bullish sentiment so far. Ethane remains the low cost feedstock to steam crackers. The ethane feedstock yields less propylene than any other feed.

Even fewer acetone imports arrived on the US shores in September than in August. Approximately 8 KT arrived in September compared to approximately 10 KT in August. The arbitrage remains open from both Europe and Asia should the sale be based off the MMA settlement with a respectable discount. However, in the spot market, the arbitrage window becomes hazier as barge pricing is all over the place. Phenol demand continues to be strong globally. All units are running much harder than forecasted at the beginning of the year. Will phenol demand continue to drastically outpace GDP growth?

The domestic truck and rail market continue to enjoy the fruits of a long acetone market. We don’t expect this recent propylene drop to have a big impact on truck and rail spot pricing. However, we have heard the phenol side of the molecule is picking up higher benzene adders in the contracts available for negotiation in 2019 and on.

We predicted in early October that the RGP/PGP delta would narrow (which it did, slightly) and for a small hike in the MMA settlement (which proved true). There is no denying this propylene drop will have an impact on the MMA settlement in November. The 3 companies out in the spot market for RGP would be the only signal for RGP to make a turn back up. We are going to predict a drop of at least 5 cents per pound in November’s MMA settlement.

 

ISSUE: November 2018

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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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