Optimism For Acetone Demand Despite Low Supply And High Prices

The production of acetone is currently running at a low rate due to significant conversion losses in phenol production, where acetone is a by-product. As a result, the supply of acetone remains thin. Furthermore, high prices for feedstock benzene have contributed to a narrower price spread between benzene and phenol, which has dropped to 60$ below breakeven.

Surge In Demand Despite Low Stocks And Reduced Production

The demand for acetone has increased this week despite the low stocks and reduced domestic production in India. The production of acetone has been impacted due to negative breakeven spreads in phenol production, where acetone is a byproduct, resulting in manufacturers running at a meager rate. Additionally, reduced production of acetone is also observed because of the high prices of feedstock benzene and the narrow price spread between benzene and phenol.

However, despite these challenges, demand for acetone has picked up this week, particularly from the pharmaceutical industry. Moreover, seasonal demand from paints and coatings is anticipated in the second half of March 2023, which is expected to further boost demand. As a result, importers of acetone remain optimistic about the chemical’s demand.

Acetone Price Change 

At the start of March 2023, the domestic market price of acetone in India saw an initial increase of 1 Rs/kg, reaching 80++ Ex Mumbai and Ex Kandla. Deepak Phenolics, a domestic manufacturer, also increased their prices to 79++ Ex Dahej. Meanwhile, HOCL offered acetone at 76++ Ex Kochi. However, within a week, acetone prices increased by 30$ to 690$ CFR in China’s market.

In the first week of March, the domestic market price of acetone continued to rise, reaching 83++ Ex Mumbai. However, due to low buying interest during the Holi festival holidays, prices decreased by 2 rupees per kg to 81++ Ex Mumbai in the second week of March 2023. Deepak Phenolics offered competitive prices, with rates at 81++ Ex Dahej for spot loading, while HOCL offered acetone at 77++ Ex Kochi.

Insight

At the start of March 2023, there was a decline of 20$ in the feedstock benzene prices, which reached 935$/Mt FOB Korea. However, as of now, the prices have slightly increased to 941$/Mt. On the other hand, the CFR China Acetone prices have increased by 35 $, reaching 695 $/Mt. While the fluctuation in feedstock benzene, prices could impact the production of acetone, the current market trends suggest that the demand for acetone is likely to remain strong soon. As a result, a price surge can also be expected from next week due to this anticipated demand and lower supplies.

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