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→ ACETONE REPORT
An Analysis by Garrett Velarde
The MMA Producer-Monthly Barge Contract for October settled at $0.4975 per pound. This represents an increase of $0.0025 per pound from September to October. Will the acetone settlement be able to get over a half dollar in the near future? Let’s look at the landscape.
The refinery grade propylene (RGP) spot weighted average in November is down approximately $0.015 per pound from October. The announcement of meaningful operating rates at
Enterprise Product’s propane dehydrogenation (PDH) unit may have brought some bearishness to RGP. However, polymer grade propylene (PGP) recently saw an uptick owing to increased PGP derivative demand. The spread between RGP and PGP currently rests at $0.14 per pound.
Domestic acetone supply has seen more balance in the last month. All force majeures from phenol/acetone producers due to Hurricane Harvey have been lifted. However, domestic supply looking forward into Q1 2018 has been called into question. A merchant phenol/acetone producer has decided to shut down a unit at the start of 2018. This decision will
have just over 300 million pounds of domestic acetone capacity disappear overnight. There are still a lot of dynamics in play until then, but what we do know now is that other phenol plants will not heavily raise operating rates to cover the lost acetone capacity, acetone imports into the USA will need to increase, and exports from the USA will need to decrease. The export phenol margins for
this plant shutting down were poor and other domestic producers will not produce more phenol (thus more acetone) to cover this shutdown. Turning to domestic demand, a polycarbonate plant is back up and running. MMA demand is still lagging, but demand in the solvents market remains strong.
The Distribution Buyer, provided for the truck and rail buyers, has seen some softening over the last three I H S reports. The October 1st report had a range of $0.56-0.685 per pound, the mid-October report had a range of $0.54-0.685 per pound, and the November 1st report had a range of $0.54-0.62 per pound. We can chalk up the light softening to producers fending off the increased imports coming in from the force majeures declared due to Hurricane Harvey.
Trade data is now available through August of this year. The USA has brought in approximately 165 million pounds of acetone through the first 8 months of the year. This is an increase of approximately 30 million more pounds than seen in the first 8 months of 2016. For exports, the USA has shipped out approximately 200 million pounds so far through August in 2017. This is approximately 13 million more pounds shipped out than seen from January to August of 2016.
The author of this monthly updated predicted not much movement from September to October. For November, we will predict a slight movement down with the recent RGP trades. If only we could predict acetone prices like this Sports Illustrated writer predicted the World Series Champs three
years in the future, we would help everyone reading this article’s cause! In case you cannot read the issue date, it is June 30, 2014!
ISSUE: NOVEMBER 2017
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