Deepak Phenolics Set to Resume Production, Triggering Buyer Expectations for Acetone Price Correction

Key Takeaways:

• Acetone prices decreased due to lower replacement costs and expected supply increase as Deepak Phenolics resumes operations.
• Chemical price stability remains uncertain.
• With domestic production meeting only about half of India’s monthly demand for Acetone, chemical import dependence is significant.

Acetone Price Update

• Acetone import prices have decreased by ₹0.5/kg, now at ₹78/kg (Ex-Kandla) on 60-day credit terms. Trader offers are varied, ranging from ₹77 - ₹79/kg (Ex-Mumbai) and ₹78.50/kg (Ex-Kandla) for advance payment terms.
• According to market participants, bulk buyers are interested in prices below ₹76/kg on 60-day credit terms. However, sellers are hesitant to go below 78 level due to the recent rebound in upstream crude oil, naphtha, and feedstocks like benzene and propylene.
• This decline in Acetone prices is attributed to lower replacement costs and Deepak Phenolics’ planned resumption of operations on 27th October 2024. Buyers expect sufficient supply by November, contributing to the current price trend. Week-on-week, domestic Acetone prices have decreased by approximately ₹1/kg.

Chemical Supply & Demand: Anticipation of Supply Rebound Affects Price Expectations

• In early October 2024, Acetone prices held steady due to a supply shortage caused by the shutdown at Deepak Phenolics’ plant.
• CFR China Acetone prices have fallen by nearly 16% since September, mainly 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 driven Acetone prices down.
• The recent rebound in crude oil, naphtha, and benzene prices may limit further declines in Acetone prices, some traders suggest. Bulk buyers, however, are anticipating a price correction as Deepak Phenolics is expected to add more supply to the market with its operations resuming this week.
• India’s monthly demand for Acetone is estimated at around 23-25 kt, with domestic producers HOCL and Deepak Phenolics having a combined production capacity of 12 kt per month. The remaining 11-12 kt is met through imports.

Chemical News: Crude and Feedstock Price Impact on Acetone

• In international markets, WTI crude oil prices rose by 0.61%, reaching $70.59/barrel. CFR Japan naphtha prices were recorded at $648/MT, while FOB Korea benzene and propylene feedstock prices were at $895/MT and $815/MT, respectively. Downstream, CFR China Acetone prices stood at $825/MT.

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Expert Opinion on Chemical Market Trends

• Acetone prices will likely remain bearish this week due to increased supply and subdued downstream demand, especially with the Diwali holidays affecting demand. Additionally, higher inventories and lower replacement costs are expected to keep downward pressure on Acetone prices in the short term.
• Nonetheless, the recent uptick in crude oil and benzene prices may offer some price stability. Buyers are advised to prioritize just-in-time procurement over inventory buildup.