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→ ACETONE REPORT
An Analysis by Garrett Velarde
The MMA Settlement for May was unanimously decided at $0.3625 per pound. This represents an increase of $0.0175 per pound from April’s settlement. The phenol/acetone market outlook is about as clear as the beautiful Galveston water. We believe by August/September that things could become clearer. That is the phenol/acetone market, not Galveston’s water.
The refinery grade propylene (RGP) movement for the latest 45-day volume weighted average was up approximately $0.02 per pound compared to the previous 45-day volume weighted average. Instead of a lock-in step by step move like last month, the settlement only took about 85% of the RGP movement. The chemical and polymer grade propylene contracts settled up $0.045 per pound in May. Propylene movement since late May/early June has been slightly down. Lower prices on heavier carbon chains (due to lower oil prices) are increasing the domestic propylene supply.
Acetone imports to the USA in April came in strong as expected ahead of the retroactive date of May 1st for duties on the 5 countries still listed in the anti-dumping duty probe. We expect imports from these countries to be negligible from May until the end of August. With the amount of material that came in April, 2019 YTD imports have nearly caught up to 2018’s levels. However, the acetone length will expire in the coming months. Lower domestic production rates and fewer imports will bump up against increased domestic demand. One of the biggest consumers of acetone reportedly will be up and running at solid rates by the end of June/beginning of July. As Bob Dylan famously said, “The Times They Are A Changin’”.
The domestic truck and rail acetone demand is still robust. This sector has remained the big volume mover over the last several months. Supply/demand will shift in the next 6 weeks though when those sizeable acetone consumers come back up needing to replenish inventory after initial consumption. Operating rates at phenol/acetone units have dropped below 70% over the last month. These rates have not been seen since mid 2017. One domestic producer of phenol/acetone remains on force majeure.
We predicted May’s MMA contract price would go up on the back of bullish propylene. With oil prices dipping a bit since our last update, propylene prices could see a slight drop in June. We will predict a slight decrease in the MMA price for June’s settlement.
ISSUE: JUNE 2019
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