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An Analysis by Garrett Velarde


The MMA Settlement for November was unanimously decided at $0.44 per pound. This represents a decrease of $0.10675 per pound from October’s settlement. The long streak of rising settlements is officially over. In fact, the 7 straight increases gained in total just over $0.12 per pound. It only took one month to get back almost to where we started. What does the last month of the year have in store for us?

The refinery grade propylene (RGP) movement in November was factored near a 0.9 level for the MMA settlement. RGP pricing decreased approximately $0.12 per pound on a 45-day volume weighted average compared to the previous 45-day weighted average. Polymer grade propylene (PGP) came down approximately $0.09 per pound during the same timeframe. In the last week of November, both grades of propylene continued their slide downwards. Offers have come off about a nickel for each grade. The delta between RGP and PGP is approximately $0.12 per pound currently. The crude oil price has allowed other steam cracker feeds like naphtha to become much more competitive to ethane. The naphtha feed outputs a lot more propylene than an ethane feed. It will be interesting to see where crude oil pricing goes after trade talks have stabilized between the USA and China as well as promised decreased outputs in Saudi Arabia and Russia. The direction crude goes could have a big impact on future propylene pricing.

Just when acetone imports started to shrink, a tidal wave of product arrived on the USA shores in October. Approximately 30 KT of acetone arrived in October. Rumor has it some of the parcels were supposed to arrive in September but were pushed back into October due to looming hurricanes. A good chunk of these imports also came in because one producer was on turnaround here in the USA and supplemented the pounds from their European facilities. Asia and Europe both saw small decreases in acetone pricing, so the arbitrage remains open, albeit not as wide as in past months this year though.

The domestic truck and rail market continues to see aggressive pricing relative to the MMA settlement. Demand in the truck and rail sector has been strong in 2018 and is expected to stay strong in 2019. The most important factor, as most times is, is the demand for phenol. If phenol demand continues hot into 2019, acetone will continue to be long. The truck and rail market is often a battleground to clear extra acetone pounds so not to disturb phenol production.

We predicted in early November that the MMA settlement would come down at least $0.05 per pound. The turn for crude oil down was the main driver. While we don’t like to predict where crude is going, the propylene bids and offers of late point for another MMA settlement down. We will call for the December MMA settlement to come down at least $0.035 per pound from November’s settlement.


ISSUE: December 2018

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