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→ ACETONE REPORT
An Analysis by Garrett Velarde
The MMA Producer-Monthly Barge Contract for March settled at $0.5375 per pound. This represents a $0.0475 per pound increase from February to March. This settlement marks the third month in a row of an increased settlement.
The refinery grade propylene (RGP) spot weighted average increased roughly $0.05 per pound from mid- month February to mid-month March. Since RGP hit its apex in an early March trade, it has since retreated about $0.10 per pound. Fluid catalytic cracker (FCC) units have come out of turnarounds and refineries are starting to ramp up ahead of the anticipated uptick in gasoline demand. Both of these contribute to more propylene supply. Currently, propane is the more valued feedstock for FCC units. This also contributes to more propylene production compared to an ethane feedstock. Polymer grade propylene (PGP) currently rests at a $0.14 per pound premium to RGP. We anticipate PGP coming down a little bit further to get more in line with the typical $0.10 per pound delta. The anticipated start-up date for the new propane dehydrogenation (PDH) unit remains in late Q2.
Acetone supply is balanced to tight here in the USA. The dynamics right now are interesting as there are signs of bears and bulls. One domestic acetone producer’s turnaround has ended, but another Gulf Coast producer is about to enter one. The same scenario exists on the acetone demand side for methyl methacrylate (MMA), as one plant will achieve their intended rates soon while another plant will go into planned maintenance in April. Globally, the acetone picture has changed night and day from the last report. The softening of benzene helped contribute to increased production of phenol and acetone in Asia. Therefore, both prices softened. China Main Port (CMP) acetone plus duty and freight can land here in the USA at approximately $0.44 per pound. On the other side of the coin, nearly all European acetone producers have had some production issues in March. Supply is tight and demand for acetone derivatives is strong around Europe and the Middle East. Consequently, the truck and rail market in these parts shot up sharply in price over March. Needless to say, Europe will not look to send their acetone abroad when their own outlets are becoming prettier and prettier. The US acetone market is tight, but the softening of propylene in the US could prevent buyers from pulling the trigger on Asian material. Europe certainly looks be the higher netback option for Asian acetone.
Demand in the domestic truck and rail market continues to be modest. The slew of announced increases in March took spot consumers by surprise. During the middle of March, purchasing managers told their sellers they were loco en la cabeza and to “look at propylene and call me back”. However, lackluster phenol operating rates kept acetone supply in check for spot consumers and distributors. The Distribution Buyer (formerly known as the Small-Medium Buyer) extended its range from $0.60-0.65 per pound in the second half of March from the range of $0.61-0.64 seen in the first half of March. Both of these ranges
are improved from the second half of February range of $0.55-0.61 per pound.
The author of this monthly update predicted March’s settlement to be up $0.03-0.05 per pound from February’s settlement. Ding ding! We will take a glass of a Napa Cab….oh wait, we already had enough of those at AFPM. Make it an iced tea. For April’s MMA Producer-Monthly Barge Contract, we predict a decrease between a nickel and a dime from March’s settlement. RGP’s influence will weigh heavily on the MMA Producer-Monthly Barge Contract. However, supply constraints will keep the Distribution Buyer in check. Domestic acetone producers will need to service their contract customers first before moving to spot buyers. We don’t see the same kind of drop in the Distribution Buyer as in the MMA- Monthly Barge Contract for April. We see the delta between these two settlements to remain stronger than the tighter window we have seen over the last year.
ISSUE: APRIL 2017
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