Acetone, also known as Propanone, is a colorless, flammable, and volatile liquid. Acetone is widely used as a solvent in various manufacturing industries, primarily in plastic manufacturing. It is also used in cosmetic and personal care products, such as nail polish remover. According to the U.S. Food and Drug Association (FDA), acetone is safe for use as an indirect additive in food-contact coatings and adhesives.
The global acetone market is growing at a CAGR of 3.4 percent currently. Further, the global acetone demand is estimated to reach an astounding volume of 7.74 MMT by 2022, making acetone one of the most sought after chemicals.
Acetone Global Market Outlook
Currently, China leads the world in acetone production and consumption. However, China is the net importer of acetone owing to huge domestic demand. The Western European region, on the other hand, is a net exporter of acetone.
- While the acetone market is currently over-supplied, the balance will tilt in favor of the producers by 2022 due to a steep rise in acetone demand; caused by an increase in demand in the downstream industries like plastics, automobile, and pharmaceutical.
- Due to the current and projected increase in demand from the automobile and pharmaceutical sectors, the demand for the BPA and the MMA segments is projected to grow at 4.5 percent and 4.7 percent, respectively. In turn, the BPA and the MMA sectors are anticipated to cause growth in the acetone demand.
- Most of the acetone production-capacity expansion projects are based around the APAC region, especially China. These projects are expected to start supplying the market by 2022. By then, the demand for acetone is also expected to weigh out the supply capacity currently available.
As of the second quarter of 2019, the major Acetone manufacturers are INEOS Phenol, Westlake Chemicals, Dow Chemicals, Shell, Sunoco, Saudi Basic Industries Corporation (SBIC), Mitsui Chemicals, CNPC, CEPSA, Sinopec, Axiall Corporation, and Borealis AG.
- The majority of acetone producers are established in China and the APAC region, and face challenges in catering to the domestic demand of this region. Acetone suppliers in North America and the Western European region have saturated the domestic market and hence are net exporters of acetone.
- The APAC region is currently planning to increase its acetone production capacity, with nearly .838 MMT of acetone production capacity to be added to the APAC region by 2022.
- Acetone is used in the plastics and rubber industry, paint industry, automobile and pharmaceutical industry, chemical materials industry, and explosives industry. Approximately 45 percent of the global demand for acetone comes from the APAC region.
- Acetone is widely used as a solvent and plasticizer (in modified forms) in the plastics and rubber industry. It is important to note that the plastics and rubber industry is directly dependent on the construction sector for their growth. The construction industry is booming, supporting plastics and rubber industries, and indirectly boosting the acetone demand. This growth is expected to continue over the coming years.
Experts believe that the support from the construction industry is crucial in balancing out the current excess supply of acetone. The APAC region, especially China, is expected to lead the consumer section of acetone in the coming years as well.
- The North American and the Western European acetone markets are saturated and well capable of catering to the domestic demand.
Prevalent Business Practices
A majority of acetone suppliers are now investing heavily in research and development activities to technologically advance the manufacturing process for acetone, broaden the avenues of acetone application across various industries, and lower the manufacturing cost of acetone significantly.
- Buyers who need a comparatively lower volume of acetone prefer to sign contracts with acetone suppliers (most common practice in the North American market) to ensure continuous supply irrespective of market demand and price fluctuations.
- Acetone production is highly dependent on phenol and feedstock with approximately 96 percent of acetone produced across the globe being a by-product of phenol production, which can cause market volatility at times. To protect their interests, acetone buyers prefer contract models against spot purchasing models.
- The demand growth rate in North America and the European region has reached its saturation point. Hence, acetone manufacturing capacity addition plans are mostly centered in the APAC region.
- The APAC acetone manufacturers publish their quotes and average price sheets, known as the Asian Contract Price (ACP) across the acetone industry. Most western manufacturers base their final contract prices on the ACP numbers.
Business Opportunities in the Acetone Market
- The Demand: Overall, the acetone demand will soon outgrow the current supply capability of the acetone industry across the globe. Hence, the acetone market provides a lucrative opportunity for new entrants.
- The APAC region (especially the developing countries such as China, India, Malaysia) is expected to be the front liner of acetone demand. New entrants should focus on this region to ensure maximum gains.
Even as the acetone industry is currently oversupplied, the demand will catch-up and take-over the supply capacity by 2022. Hence, the capacity expansion would be among the top priorities for the acetone industry; providing a golden chance to new players looking to enter the market.