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An Analysis by Garrett Velarde


The MMA Settlement for January was unanimously decided at $0.36 per pound. This represents a decrease of $0.0025 per pound from December’s settlement. Propylene movements have leveled out. Are we nearing a bottom for the MMA settlement or are we in the proverbial ‘eye of the storm’?

The refinery grade propylene (RGP) movement in January was above a factor of 1 versus the movement in the MMA settlement. RGP pricing was flat comparing the last two 45-day volume weighted averages, yet the settlement still came slightly down. First hunch tells us that this was done to get contract pricing off the MMA settlement more in line with spot numbers seen globally. Since mid January, RGP has climbed a few cents per pound alongside a crude oil price lift. Polymer grade propylene (PGP) has been relatively flat in recent trades. However, there are a lot of futures (Q3 and Q4 2019) done at significant premiums to current levels. These trades are likely done on the premise of higher oil prices anticipated down the road this year.

Acetone imports in December were pinned at just over 6 KT. This was the least amount of acetone brought in to the USA for any month in 2018. This is pretty standard though as buyers draw down their inventory to avoid paying Uncle Sam too much money. Contract prices remain exposed to the arbitrage from both Europe and Asia. However, domestic spot pricing is attractive enough to discourage imports. European and Asian phenol/acetone manufacturers will take a look at their margins on phenol first to determine their price level needed to move acetone to remain profitable on the entire molecule. We project 2019 import levels to be at least 10% lower than 2018.

The sentiment in the domestic truck and rail market remains the same from last month. The distribution space continues to be a battleground with lots of sellers out there. Contract versus spot pricing remains separated, but not to the extent it was back in mid to late 2018. Global phenol demand remains at the forefront of the conversation on whether acetone will remain long in 2019. It appears a strong global economy may not be the best thing for higher acetone prices.

We predicted the January MMA settlement would be up or down $0.015 per pound from the December settlement. It indeed was stable. We predict February will continue on the same track. Energy prices are bouncing around day to day lately. We think when it is all said and done for February, the number will be pretty close to where it was in January.



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