Bearish Acetone Market Expected as Inventories Rise, Demand Slows

Key Takeaways

• Acetone prices dropped to ₹77.50/kg (Ex-Kandla) as supply increased, with the recent reopening of Deepak Phenolics adding further downward pressure.
• Importers have been quoting prices around ₹77.50 - ₹79.00/kg, though buyers are looking for deals below ₹76.50/kg.
• The price decline aligns with weaker replacement costs and low seasonal demand during the Diwali period.

Acetone Price Decline Amid Increased Supply and Weak Demand

• Acetone import prices have dipped by ₹0.5/kg, currently at ₹77.50/kg (Ex-Kandla) on 60-day credit terms. Trader offers show a range from ₹77.50 - ₹79.00/kg (Ex-Mumbai) and ₹78.50/kg (Ex-Kandla) for advance payment arrangements.
• Market participants indicate that bulk buyers are interested in securing prices below ₹76.50/kg on 60-day credit terms; however, there are limited seller offers due to the Diwali holiday period.
• The current decline in Acetone prices is largely attributed to lower replacement costs and the resumption of operations at Deepak Phenolics on 27th October 2024.
• Buyers are anticipating an ample supply by November, which is adding to the existing downward price pressure. Domestic Acetone prices have seen a week-on-week decrease of around ₹1/kg.

Market Factors Impacting Acetone Pricing and Supply

• At the start of October 2024, Acetone prices held steady amidst a supply shortage driven by the shutdown at Deepak Phenolics’ plant.
• CFR China Acetone prices have dropped by nearly 16% since September, primarily due to the shutdown of key downstream MMA plants in China and Taiwan.
• Additionally, significant price corrections in upstream crude oil, naphtha, and benzene have further exerted downward pressure on Acetone prices.
• Nonetheless, the recent rebound in crude oil, naphtha, and benzene prices may limit further declines in Acetone prices, according to some traders.
• Bulk buyers, however, are expecting price corrections with Deepak Phenolics set to increase supply following the resumption of its operations this week.
• India’s monthly demand for Acetone is estimated at around 23-25 kt, with domestic producers HOCL and Deepak Phenolics collectively producing up to 12 kt per month. The balance of 11-12 kt is typically met through imports.

Current Trends in Global Feedstock and Acetone Prices

• On the global front, WTI crude oil prices rose by 0.69%, reaching $67.67/barrel. CFR Japan naphtha prices were recorded at $642/MT.
• FOB Korea benzene and propylene feedstock prices reached $895/MT and $815/MT, respectively. Downstream, CFR China Acetone prices stood at $825/MT.

Acetone Price Projections and Buyer Strategies

• Industry Expert anticipates a continued bearish trend in Acetone prices this week, driven by increasing supply and subdued downstream demand, especially with Diwali holidays impacting consumption.
• Higher inventories and reduced replacement costs are also expected to exert short-term downward pressure on prices. However, the recent uptick in crude oil and benzene prices could lend some stability.
• Buyers are advised to adopt just-in-time procurement practices rather than building inventories at this stage.