The prices presented herein are strictly the opinion of CMAI and are based on information collected within the public sector and on assessments by CMAI staff. CMAI MAKES NO GUARANTEE OR WARRANTY AND
This report is for the exclusive use of the client company. Distribution outside of the client company is strictly prohibited without the prior written consent of Chemical Market Associates, Inc. (CMAI).
ACETONE
MARKET REPORT
January - SUMMARY
CMAI - HOUSTON Adrian Beale/Marc Laughlin
Tel: 281-531-4660
CMAI - EUROPE Alex Lidback/Brian Cooke
Tel: 44-207-930-9818
CMAI - SINGAPORE
Tel: 65-6-226-5363
©Copyright CMAI 2008 All Rights Reserved
[email protected] [email protected]@cmaiglobal.com
United States
Large Buyer (1, 3, 6) Q4 2007 47.50 - 47.50 1047.2 - 1047.2 708 - 708 Small-Medium Buyer (1, 2, 6) 2H January 55.00 - 60.00 1212.5 - 1322.8 820 - 895
Export, USGC (5) 42.00 - 44.00 925.9 - 970.0 »
West Europe, ($1.478/Euro)
Large Buyer (1, 3, 6) 62.4 - 62.4 1374.7 - 1374.7 930 - 930 Distribution Market (1, 2, 6) 45.9 - 48.6 1012.6 - 1071.7 685 - 725
Export, ARA (5) 37.9 - 40.8 835.0 - 900.0 n»
Asia
China, Domestic (1), (RMB7.191/US$) 59.0 - 59.4 1300.2 - 1310.6 »
China, Domestic (Import Equivalent) 46.2 - 46.6 1019.6 - 1028.0 »
China, Main Port (4) 44.9 - 45.8 990.0 - 1010.0 »
PROPYLENE INDICES (Acetone*/Propylene) West Europe Asia
(e.g. 20.0 cpp acetone/15.0 cpp propylene = 1.33) Contract Export Contract Distribution China NEA
Refinery (Spot) 0.85 0.75
Chemical (Spot) 1.01 0.89 1.17 0.86 0.73 #N/A
Polymer (Spot) 0.79 0.70 1.07 0.79 0.78 #N/A
*Large Buyer Price
SPOT TRADE PRESSURE CALCULATION (positive values suggest profit incentive to move product)
all units are $/ton from: West Europe Asia
to: Freight Pressure Freight Pressure Freight Pressure
United States 85 -99 115 -262
West Europe 105 -185 110 -243
Asia 120 -68 110 23
Not settled, previous or quarterly price posted
All Prices are FOB Unless Notes Indicate Otherwise. Changes from last report
n - Notional price range, no transactions « prices moved lower
Price Range Covers From First Day of Month Through This Report's Date. » prices moved higher
Prices Are For The Current Month Unless Noted. - prices are unchanged
(1) Delivered or minimum freight allowed (3) Barge delivery (5) FOB
(2) Truck/Rail delivery (4) CFR (6) Excludes Discounts
SPOT
2H-January Cents/Lb. $/Ton €/Ton Cents/Lb. $/Ton
Pr ici ng N ot es United States
Prices for Period Ending: CONTRACT
United States
2008 2009
Qtr-2 Qtr-3 Qtr-4 Qtr-1
United States
Large Buyer (1, 3, 6) cents per pound 47.50 - 47.50 50.00 49.00 46.00 49.67
Small-Medium Buyer (1, 2, 6) cents per pound 55.00 - 60.00 55.75 54.75 51.75 55.42
ratio to propylene, refinery spot 0.9 0.92 0.98 0.98 1.10 ratio to propylene, chemical CP 1.0 0.84 0.89 0.89 1.00
West Europe
Large Buyer (1, 3, 6) Euro per ton 930 - 930 960 905 855 815
Distribution Market (1, 2, 6) Euro per ton 685 - 725 737 703 664 640
ratio to propylene, chemical spot 1.0 1.06 1.03 1.04 1.06 ratio to propylene, polymer CP 0.8 1.03 0.99 1.01 1.02
Exchange Rate US$ per Euro 1.48 1.47 1.46 1.43 1.40
Asia
China, Main Port (4) US$ per ton 990 - 1010 990 843 770 760
ratio to propylene, polymer spot 0.8 0.78 0.76 0.75 0.76
The forecasts are the opinion of the ACMR and based solely on information in the public sector and assessments of CMAI. There is no guarantee as to their use.
Current Prices
QUARTERLY PRICE FORECAST January 31, 2008
Acetone Market Report
0 10 20 30 40 50 60 70Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Large Buyer CP Refinery Propylene, Spot
Chem Propylene, CP ~
U.S. Acetone Raw Materials
Cents Per Pound
0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 Q1-02 Q1-03 Q1-04 Q1-05 Q1-06 Q1-07 Q1-08 U.S. Acetone to Propylene Ratio
Acetone/Spot Refinery Grade Propylene
~ Ratio
Acetone 1H-December 2H-December 1H-January 2H-January
Delivered cts/lb 55.00 - 58.00 56.00 - 60.00 56.00 - 60.00 55.00 - 60.00
US$/MT 1213 - 1279 1235 - 1323 1235 - 1323 1213 - 1323
U.S. Small-Medium Buyer Market Price History
UNITED STATES
The large buyer contract discussions for Q1 2008 are off a slow start with no real price discussion range in the public domain. A few operational is-sues on both sides of the table have not been helping the matter. As mentioned in previous reports, a major phenol/ acetone producer had experienced operational issues after their planned maintenance outage of 3 weeks that led to them taking another unplanned outage of approximately 7 days. Now a major buyer is experiencing issues at one of its facilities; this just ahead of their planned 20 day maintenance outage in February. It is our under-standing that this major acetone buyer has reduced their acetone consumption so far for January and February by a total of approximately 6,000 metric tons.
A major phenol/acetone producer is still planning to go forward with private and confidential monthly contract pricing in the larger buyer market segment; however, no large buyer has confirmed that they have agreed to this and clearly there is some resistance. We will monitor the situ-ation closely and comment on it as it becomes clearer.
The small to medium buyer market has continued to diverge. We are seeing a bit of price softening from the beginning of the month with some producers reducing their January 1st price increase mid month and there is
some competitively priced material in a few spots throughout the country around 55 cents per pound. It should be noted that a few producers are keeping their prices firm on the upper end of the range of 58-60 cents per pound. Supplies are understood to be readily available and for some demand seems to be a bit weaker than this time last year while others are experiencing better business than they had expected.
Acetone Market Report
On trade, we continue to see weak importsand decent exports. The per month aver-age imports for the months of January thru November (the latest trade data available) for 2005, 2006 and 2007 are 6.2, 3.7 and 3.4 metric tons, respectively. In likewise fashion, exports for those years are 27.4, 23.5 and 25.6 metric tons, again respectively.
EUROPE
There has been little to no progress on the first quarter acetone price settlement. The two sides remain very far apart and it appears that negotiations will continue to linger well into the first quarter. As you may recall, produc-ers would like to increase prices in conjunc-tion with the €57 per ton increase for the Q1 propylene price. Buyers, conversely, would like to press for a rollover to only a marginal increase - hence, the stalemate.
Both sides are adamant about their position. Let’s start with the production side. Producers have struggled to keep pace with propylene throughout 2007, despite all the acetone out-ages, which has made acetone’s contribution detrimental to the phenol/acetone business. Depending on where negotiations settle out in the first quarter, the industry is looking at one of the lowest, if not the lowest acetone to propylene ratio in history. Please consider that is based on applying a net price assuming known discounts on the quarterly price which tend to be quite generous.
The buy side position, on the other hand, is pushing for little to no increase. They point to various dynamics. The spot price has shown little change relative to December partly because demand in January has yet to show the full seasonal upswing. In addition, MMA producers are trying to increase Q1 prices and they are struggling to do so. Therefore, they are pushing back because of the large increase they absorbed because of methanol. Yes, producers say that has nothing to do with acetone but it has created a large incentive to push back where possible. Furthermore, buyers feel that time is on their side as more capacity is scheduled to come on line in
Acetone 1H-December 2H-December 1H-January 2H-January
Delivered cts/lb 44.5 - 47.1 45.5 - 48.1 45.9 - 48.6 45.9 - 48.6
€/Ton 680 - 720 680 - 720 680 - 720 685 - 725
Exchange rate: $1.443/Euro $1.474/Euro $1.488/Euro $1.478/Euro
West Europe Distribution Market Price History
Ratio Acetone to Propylene
0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8
Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 U.S. Large Buyer Europe Large Buyer NE Asia ~ 0 100 200 300 400 500 600 700 800 900 1000
Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08
0.9 1.0 1.1 1.2 1.3 1.4 1.5 1.6
Ratio Acetone to Poly C3 Large Buyer
~ West Europe Acetone and Propylene Ratio
Euro per Ton Ratio
Acetone Market Report
Acetone 9-Jan-08 16-Jan-08 23-Jan-08 30-Jan-08
CFR China cts/lb 43.54 - 44.45 n 43.54 - 45.36 44.45 - 45.36 n 45.36 - 46.27
US$/MT 960 - 980 n 960 - 1000 980 - 1000 n 1000 - 1020
n = notional posting
China Price History
0 200 400 600 800 1000 1200 1400
Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 PG Propylene NEA Spot Acetone CFR China
China Acetone vs Propylene Dollars Per Metric Ton
~
the first quarter (see below) suggesting there is little incentive to settle early.
One of the questions arising from such a stale-mate is how to handle invoicing? What are the alternative mechanisms in contracts? All of these issues are being closely analyzed. In operational news, earlier in the month Ineos Phenol successfully started its number one unit at Antwerp. The second unit, which recently was scheduled to restart on January 21, has been pushed back to sometime in the middle of February. As you may recall, the second unit will come on stream with an additional 130,000 tons of acetone capacity which is a reason why some buyers feel time is on their side. This will clearly help their balances but they will begin efforts to prepare for their turnaround in April at Gladbeck. At this point, there have been no announced changes to the
force majeure and the sales allocation of 70 per
cent of previous volumes remains in place. In the distribution market, demand has started the New Year fairly slowly making it difficult to raise prices. Consequently and as noted above, increases have been marginal, on aver-age, around €5 per ton to €685-€725 per ton delivered. Within this range, the lower prices have generally been for direct producer-to-consumer deliveries. Most distributor busi-ness has been at the higher end of the range delivered Germany or France. At the end of
the day, demand needs to improve to see more upward price pressure. One should expect sellers to be even more aggressive as in their eyes they have catching up to do on margins as they absorbed the entire propylene increase with only minimal increases for acetone.
Europe’s acetone export market is rather difficult these days as prices in Asia have been rather stable and low. In addition, the market has been quiet. The effect from this is that the netbacks are very, very low and not at-tractive to sellers. Therefore, the spot market is fairly quiet.
Regional Acetone Prices
0 200 400 600 800 1,000 1,200 1,400 1,600
Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Dollars per Ton
U.S. Large Buyer Europe Large Buyer NE Asia
Acetone Market Report
ASIA
Aided by the increases in import prices, domestic sellers continued with their efforts to keep their price levels up. Lower market inventories are also helping. On the other hand, Chinese demand remains gloomy due to more extensive shutdowns taking place in the derivative sectors ahead of the Lunar New Year holidays. In East China, the mainstream spot transactions improved slightly to RMB9,350-RMB9,450 per ton depending on location. Current notional spot prices are estimated in a range of $1,000-$1,030 per ton CFR.
FORECAST
U.S. Price Forecast
Concerning acetone demand, a major MMA producer has a turnaround scheduled for approximately 20 days in February at one of its units; however they are currently experiencing operational issues. In the near term we expect that acetone prices will remain flat due to feedstock costs, but offset a bit by the aforementioned demand dynamics. Further out we expect acetone prices to decline due to a more well supplied global acetone market.
In January, CMAI began reporting a new propylene marker entitled “Refinery Grade Propylene Weighted
Aver-age Acquisition”, following the demise of the Refinery Grade Propylene (RGP) contract price. This price is the
weighted combination of spot and contract RGP transactions for the current month. The CMAI 1st half January
Weighted Average Acquisition price for RGP is 56.64 cents per pound. As previously advised, for January we will still use the start-month spot weighted average RGP price for our cumene contract price, but we will con-sider which RGP price to use in future calculations based on how the industry adopts the new marker prices.
European Price Forecast
CMAI’s price forecast for acetone contract prices in Europe is based on our forecasts for propylene price de-velopments. Therefore our forecast calls for gross acetone contract prices to roughly follow propylene price developments over time. However, it appears acetone prices in the first quarter will separate themselves from propylene to historical levels, on the low end. Obviously this is not good news for producers but it shows the global glut of acetone. Our forecast calls for net acetone prices be slightly under 80 percent of the value of propylene for the near future. Please note that CMAI is applying a heavily discounted acetone price to correctly represent market conditions. We expect this ratio to hover around this level in the near term and we believe it will remain slightly under 80 percent due to global length and as new capacity enters the market. The possibil-ity exists for it to fall further if propylene prices rise and domestic and export phenol demand is exceptionally strong. It will be interesting if phenol exports are strong but sellers are reluctant to ramp up rates due to the acetone market. From a phenol producer’s point of view, acetone has been the culprit for the poor margins despite a tightly balanced phenol market. It is worth noting that efforts to increase phenol prices relative to benzene to help overall profitability have seen some success.
There are players in the acetone market who would like to see the current acetone pricing structure completely overhauled as discounts have grown dramatically in recent years creating a disparity between gross and net contract levels. This suggests that a possible rebasing may be launched by a player but at this point there is no clear indication whether this will be tackled soon. CMAI is considering all avenues to better reflect the market in the coming months and we would welcome your comments.
Acetone Market Report
Revised: January 31, 2008 2008 United States Acetone Operating Schedule
(000 Metric Tons) Annual Capacity
Company Location Process Capacity Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
UNITED STATES
Dow Institute IPA dehydro 77 - - -
-Oyster Creek Phenol co-product 183 - - 6 - - -
-Eastman Kingsport Other 11 - - -
-Georgia Gulf Plaquemine Phenol co-product 141 3 - 4 - - -
-Goodyear Bayport Other 7 - - -
-Ineos Phenol Mobile Phenol co-product 335 - - -
-JLM Industries Blue Island Phenol co-product 28 - - - 1 -
-Lyondell Bayport Other 30 - - -
-MtVernon Phenol Mount Vernon Phenol co-product 217 - - -
-Shell Chemical Deer Park Phenol co-product 162 3 - - -
-Deer Park Phenol co-product 210 4 - - -
-Sunoco Frankford Phenol co-product 220 - - -
-Frankford Phenol co-product 127 - - -
-Haverhill Phenol co-product 78 - - -
-Haverhill Phenol co-product 109 - - -
-Total U.S. 1,935 10 - 10 - - - - - - 1 -
-North American Capacity 1,935 164 153 164 159 164 159 164 164 159 164 159 164 North American Capacity Lost 20 10 - 10 - - - - - - 1 - -North American Capacity Lost: Others/Estimates - - - - - - - - - - - - -North American % Capacity Lost 1.0% 6% 0% 6% 0% 0% 0% 0% 0% 0% 0% 0% 0% Where necessary CMAI has estimated operations. Capacities are prorated for new plants/expansions.
Revised: January 28, 2008
2008 West Europe Acetone Operating Schedule (000 Metric Tons) Annual Capacity
Company Location Process Capacity Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Belgium
Ineos Phenol Antwerp Phenol co-product 146 4 - - - -Antwerp Phenol co-product 265 15 - - -
-Total Belgium 411 19 - - - - - - - - - -
-Finland
Borealis Poly Porvoo Phenol co-product 118 - - -
-Total Finland 118 - - - - - - - - - - -
-France
NOVACAP Roussillon Phenol co-product 78 - - - 2 - - - -Roussillon Phenol co-product 19 - - - 1 - - -
-Total France 97 - - - - - - - 3 - - -
-Germany
DOMO Chemicals Leuna Phenol co-product 47 - - - -Leuna Phenol co-product 47 - - -
-Ineos Phenol Gladbeck Phenol co-product 409 - - - 34 - - -
-Total Germany 503 - - - 34 - - - - - - -
-Italy
Polimeri Europa Mantova Phenol co-product 186 - - -
-Syndial Porto Torres Phenol co-product 112 - - -
-Total Italy 298 - - - - - - - - - - -
-Netherlands
Shell Chem Neth Pernis IPA dehydro 150 - - -
-Total Netherlands 150 - - - - - - - - - - -
-Spain
Ertisa Huelva, HL Phenol co-product 130 - - - -Huelva, HL Phenol co-product 99 - - - -Huelva, HL Phenol co-product 125 - - -
-IQA Tarragona, TG IPA dehydro 9 - - -
-Total Spain 363 - - - - - - - - - - -
-United Kingdom
Total United Kingdom - - - - - - - - - - - -
-West Europe Capacity 1,940 164 154 164 159 164 159 164 164 159 164 159 164
West Europe Lost 56 19 - - 34 - - - 3 - - -
-West Europe % Capacity Lost 2.9% 12% 0% 0% 21% 0% 0% 0% 2% 0% 0% 0% 0% Where necessary CMAI has estimated operations. Capacities are prorated for new plants/expansions.
Acetone Market Report
Revised: January 28, 2008 2008 Asia Acetone Operating Schedule
(000 Metric Tons) Annual Capacity
Company Location Process Capacity Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
CHINA
Blue Star Harbin, Heilong. Phenol co-product 75 - - -
-Jilin Chemical Jilin, Jilin Phenol co-product 47 - - -
-Kingboard Huizhou, GuangdonPhenol co-product 77 - - -
-Shanghai Pac Caojing, Shanghai Other 5 - - -
-Sinopec Gao Qiao Caojing, Shanghai Phenol co-product 78 - - - -Gaoqiao, Shanghai Phenol co-product 22 - - - -Gaoqiao, Shanghai Phenol co-product 24 - - -
-Tongliao ChemicalShanghai, ShanghaOther 3 - - -
-Yanshan PC Fangshan, Beijing Phenol co-product 31 - - - -Fangshan, Beijing Phenol co-product 62 - - -
-Total China 122 - - - - - - - - - - -
-JAPAN
Chiba Phenol Chiba, Phenol co-product 143 - - 12 2 - - -
-Mitsub. Chemical Kashima, Phenol co-product 155 - - - - 4 13 - - -
-Mitsui Chemicals Chiba, Phenol co-product 118 - - - 10 2 Sakai, Phenol co-product 124 - - - 10 2 - - - -
-Sumitomo Chem. Oita, Other 12 - - -
-Total Japan 552 - - 12 2 4 23 2 - - - 10 2
KOREA
Kumho P&B Yeosu, Phenol co-product 62 - - - -Yeosu, Phenol co-product 19 - - - -Yeosu, Phenol co-product 120 - - -
-LG Chemical Yeosu, Phenol co-product 123 - - - 9 - - -
-Total Korea 324 - - - - - 9 - - - - -
-TAIWAN
Chang Chun PC Kaohsiung, Phenol co-product 124 - - -
-FCFC Mai Liao, Phenol co-product 124 - - 10 3 - - - -Mai Liao, Phenol co-product 124 - - 10 3 - - -
-Lee Chang Yung Lin Yuan, Kaohsiun IPA dehydro 30 - - -
-Tai Prosperity Lin Yuan, Kaohsiun Phenol co-product 138 - - -
-Total Taiwan 540 - - 20 7 - - - - - - -
-SINGAPORE
Mitsui Phenols Pulau Sakra, Phenol co-product 186 - - - 11 - - -
-Total Singapore 186 - - - - - 11 - - - - -
-ASIA Capacity 2,079 168 157 168 162 168 162 176 186 180 186 180 186
ASIA Capacity Lost 101 - - 32 9 4 43 2 - - - 10 2
ASIA Capacity Lost: Others/Estimates - - - - - - - - - - - -
-ASIA % Capacity Lost 4.9% 0% 0% 19% 5% 3% 26% 1% 0% 0% 0% 5% 1%
