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→ ACETONE REPORT
An Analysis by Garrett Velarde
The MMA Settlement for May was split between $0.265 and $0.275 per pound. This is the first split settlement of 2020. Using the average of the split settlement, May had an increase of $0.0075 per pound over April. Despite the small increase, acetone remains snug in the USA. Unfortunately for consumers and distributors, the rest of the world will not come to cover the shortness in the near future. We shall explain.
The refinery grade propylene (RGP) movement for the latest 45-day volume weighted average was flat compared to the previous 45-day volume weighted average. RGP trades are stable around the $0.10-0.11 per pound level. As predicted last month, fuel prices saw heavy volatility in May. The hefty drop in domestic rig counts and producers shutting in wells eventually took its toll. Gasoline prices shot up 70-80% from the bottom seen in April.
Acetone remains tight in the USA. The rest of the world will not come to our aid due to higher prices there locally or because of the anti-dumping duties (ADD) imposed by our government against the traditional import players. Producers abroad not affected by the ADD will have a better return selling to India or China, countries also net short acetone. Acetone demand in the USA is steadfast on the back of two particular end uses. First, acetone can be a feedstock for IPA production. IPA is an ingredient in hand sanitizer and disinfectants. Secondly, the screens in stores across from the cash register are produced from methyl methacrylate (MMA), an acetone derivative and the largest use for acetone in the USA.
The domestic truck and rail market absorbed a large chunk of the 4 different price increases announced this year. Contract and spot pricing have further widened amidst low supply. Without imports and strong domestic phenol producer run rates, consumers and distributors have no other options. Domestic producers are doing their best to make the most on acetone with phenol struggling in demand for epoxy and phenolic resins.
We predicted May’s settlement to rise significantly. Maybe subtract ‘significantly’ from that sentence? Also forget the part about us thinking the May settlement will start with a ‘3’? Anyhow, June is a tough call. Summer tends to bring higher fuel values year in and year out. Hate to break it to y’all but 2020 ain’t one of those “year in and year out”. We see June’s settlement increasing from May based upon our opinion RGP values can’t go too much lower. Acetone demand will stay strong without the supply to satisfy. Welcome to summer folks!
ISSUE: JUNE 2020
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