Published on March 5, 2014
The demand in the Chinese market after post lunar New Year holiday was still due to heavy losses in the feedstock sector. Few Acetone importers from China had adopted the stance of wait and watch as prices of Acetone had weakened in China. In the late February 2014, the slump in the prices of raw material Benzene and Propylene amid immense repay in the petrochemical market and along with the post New Year Holiday, Acetone inventory build had contributed to a soft outlook among few Chinese importers.
According to Chinese importer, the demand of Acetone was not as sturdy as they had expected to be after the Chinese Lunar New Year holidays, however, the buyers prefer to trade Acetone which is produced locally in Yuan, as weaker Yuan was pushing up the cost of US dollar denominating imports. Moreover, by the recent fall in Benzene and Propylene prices, margins for Phenol-Acetone producers have been strengthen. This can prompt most of the producers to ramp up their plant operating rates which will than result in higher Acetone output.
Last year China had extended antidumping duty on Japan, Singapore, South Korea and Taiwan which was delayed and the Ministry of Commerce of China had commenced the investigation from 8th June, 2013 to 8th June, 2014. In the year 2012, the ministry had announced that the tariffs forced on these countries would expire by 9th June 2013. On 8th June, 2008 the ministry had imposed antidumping duties between 5% and 51.6% on Acetone imports from Japan, Singapore, South Korea, and Taiwan. On 9th September, 2010 the ministry had reduced the imposed antidumping duties from 8.9% to 4.3% for Kumho P&B Chemicals based in South Korea.
Since the Lunar New Year holiday, most of the market participants had anticipated a hectic turnaround season at Phenol-Acetone plant to provide a floor for acetone prices in March and April, a build in port inventories, sudden depreciation of the Yuan against the US dollar along with the decrease in the domestic prices of Acetone had contributed to a softer buying sentiments among the importers.
As per the Asian trader, several Phenol-Acetone plants based in Asia has been schedule for maintenance turnaround and most of the downstream products will also face shutdown in March 2014. This turnarounds and shutdown by the Phenol-Acetone producers might partially offset the restriction of the supply of Phenol-Acetone.
One of the major Phenol-Acetone plants Formosa Chemical & Fiber Corp (FCFC) is likely to shut its Phenol-Acetone plant in the Q1 of 2014. The company has scheduled a maintenance turnaround from the first week of March 2014 and is expected to remain off stream until mid-April 2014. The plant located at Mailiao, Taiwan operates Phenol and Acetone plants with a production capacity of 400,000 mt/year and 250,000 mt/year, respectively.
Another major Chinese Phenol-Acetone manufacturers Sinopec Shanghai Gaoqiao has also scheduled maintenance turnaround in the Q1 of 2014. The plant is expected to shutdown in March 2014 and will remain off-stream for a period of around one month. The Phenol-Acetone plant is situated in Caojing, China and has a production capacity of 200,000 mt/year.
Chang Chun Plastics based in China has scheduled to shut its phenol-acetone plant for maintenance turnaround in the second half of 2014. The company is likely to shutdown its plant in the second half of 2014, however, the exact schedule of the turnaround is not clear. The plant located at Changshu in Jiangsu province of China operates Phenol and Acetone with production capacity of 300,000 tons/year and 185,000 tonnes/year, respectively.
Two major petrochemical industry Ineos and Sinopec have signed a joint venture agreement and the Articles of Association to form a 50-50 joint venture company at Nanjing on Tuesday. The joint venture will be called Ineos YPC Phenol Nanjing Co. which will set to build the largest Phenol-Acetone plant in China and will have a total investment of approximately USD 0.5 billion (RMB 3.15 billion) and is expected to start its operation by the end of 2016. The plant will be located at Nanjing Chemical Industrial Park and the annual capacity of the new plant will be at least 400,000 tonnes of Phenol and 250,000 tonnes of Acetone. The complex will also include 550,000 mt/year of cumene capacity. This joint venture is the largest investment of Ineos in China and the eighth joint venture of Sinopec Yangzi Petrochemical Company.
Nevertheless, several market participants have maintained a positive imminent market outlook in spite of slower-than-expected recovery in demand from certain downstream sectors. Moreover, importers are dubious to offer further discounts and endure a further margin squeeze, as the current domestic prices are approaching the cost of imported material and local prices are suspected to further plunge down in the near future. According to the Chinese Acetone importer, in the month of March the market is still expected to see moderate gains, as supply will be tightened by the numerous overlapping Phenol-Acetone plant turnarounds.
