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An Analysis by Garrett Velarde


The MMA Settlement for July was unanimously decided at $0.53 per pound. This represents an increase of $0.01 per pound from the June settlement. The conductor’s call for a crescendo continues and the orchestra obliges. Could there be 5 straight months of rising settlements!?

The refinery grade propylene (RGP) movement in July was only halfway reflected in the July MMA Settlement. RGP pricing increased approximately $0.02 per pound on a 45-day volume- weighted average. There is much debate on the 45-day volume weighted average versus the movement in the MMA Settlement. The factor changes from month to month. Most argue the factor adjusts month to month based upon acetone supply/demand as well as acetone import pricing. Since mid-July, RGP has stayed strong and traded a bit higher. Polymer grade propylene (PGP) has gained even more ground than RGP. Two propane dehydrogenation (PDH) units are struggling, which puts pressure on the splitters to
cover the shortfall of PGP production. We don’t see the writing on the wall for relief in propylene prices in the near future.

The amount of acetone imports have stabilized over the course of April to June. Having said that and per last month’s report, some of the imports over this time span came in off-spec. Domestic phenol/acetone producers continue to run at strong (82-84%) operating rates due to strong global phenol demand. According to one publication, US phenol exports are up 10% in 2018 over last year
for the first 5 months of the year. Phenol applications such as production of oriented strand board, plywood, and phenolic resin-coated frac sand are all up year over year through May. Of course, the strong demand for phenol means there are 0.615 more acetone molecules coming out of a
producer’s plant for every phenol molecule. If the good times continue for phenol demand, it will be interesting to see the mindset producers have for the selling of the acetone molecule. This would certainly create a new dynamic in the way settlements occur for any of the end uses of acetone.

The domestic truck and rail market saw increases from $0.13-0.165 per pound collectively over the course of mid-May to the beginning of July. With propylene in flux, acetone


ISSUE: August 2018


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