Acetone, widely recognized for its use as a nail polish remover and paint stripper, played a key role in alleviating Asian phenol makers’ losses in 2024. But can it once again serve as a lifeline for phenol in 2025? Market observers are skeptical.

In the conventional cumene process, phenol and acetone are produced from benzene and propylene. For every metric ton of phenol produced, about 0.6 mt of acetone is generated as a coproduct. Therefore, the amount of acetone produced is closely tied to the operating rates of phenol plants.

Outperformance in 2024

In 2024, as Asian phenol prices bowed to the reality of excess supply and insufficient demand, producers responded by cutting capacity utilization. This led to a decline in acetone output, which coincided with strong acetone pull from markets including the U.S. and Central America.

The comparative strength of acetone was also evident in China, where domestic acetone prices briefly surpassed those of phenol during 2024, marking an unusual reversal in the typical price relationship between the main product and its coproduct.

Chemical Market Analytics (CMA) by OPIS data reveals that the acetone/propylene ratio, which measures acetone’s price strength relative to its feedstock, surged above 1 in 2024, a phenomenon last seen in 2020. According to CMA’s forecast, however, the acetone/propylene ratio is expected to revert to the historical years’ average of 0.7 to 0.8 in 2025.

As Terence Peh, Singapore-based Associate Director at CMA points out, what drove acetone’s outperformance in 2024 was not demand, but the worse-than-expected phenol market conditions that pushed Asian phenol makers to operate at multi-year lows. The roots of this development could be traced back to late 2023, when Asian phenol makers attempted – but ultimately failed – to secure buyers’ support for benzene-linked phenol contract prices for the following year. Phenol market participants subsequently reverted to using published assessments to price their spot and term contracts.

“It was more of a shock effect, driven more than anything by phenol producers’ steep losses and associated production cutbacks,” Peh said.

In 2023, seven new phenol plants were commissioned in China. By 2024, Asian phenol producers were facing their second consecutive year of operating at a loss. Initially, phenol makers had hoped that the market would stabilize after the surge in capacity in 2023. Instead, the reality of oversupply was exacerbated by downstream industry consolidation. Notably, three bisphenol-A plants in Japan closed in 2024, cutting the nation’s BPA production capacity by over 60%.

Meanwhile, although China remains the region’s top importer of acetone, imports are falling as the country’s self-sufficiency rises. China’s acetone imports fell by 23% in 2024 compared to the previous year. At the same time, the country exported nearly a third more acetone in 2024 than in 2023, according to Customs data.

In addition to its use as a solvent and feedstock for BPA, acetone is a precursor to petrochemicals including methyl methacrylate, isopropanol and methyl isobutyl ketone. These products are also facing their own challenges of excess supply, as narrow margins limit producers’ ability to absorb higher acetone costs. On top of the closure of three BPA plants, two acetone-based MMA plants also shuttered in Asia in 2024.

What Lies Ahead

A challenge for Asian phenol makers in 2025 will be finding outlets for their surplus acetone.

In 2024, some Asian phenol makers capitalized on strong U.S. demand and high prices for acetone and sent their cargoes westward. However, arbitrage opportunities are expected to diminish in 2025.

In the U.S., German petrochemical maker Roehm is set to start up its 250,000 mt/year ethylene-fed MMA plant in Bay City, Texas. At the same time, Roehm also plans to close its 150,000 mt/year acetone-fed MMA plant in Westwego, Louisiana, around mid-2025. This could reduce U.S. acetone imports by around one-third to 130,000 mt in 2025, according to CMA’s projection.

In an otherwise challenging market, the anticipated start-up of India’s first MIBK plant stands out as a rare bright spot. The commissioning of Deepak Phenolics’ 40,000 mt/year MIBK plant in 2025 is expected to increase India’s captive acetone usage by about 52,000 mt/year, widening a shortfall that will need to be filled through imports.

Another reprieve for Asian acetone exporters comes from Japanese producer Mitsubishi Chemical Group’s decision, announced in January 2025, to halt plans for constructing a 350,000 mt/year ethylene-based MMA plant in Geismar, Louisiana. In its Jan. 7 announcement, Mitsubishi Chemical stated that it expects to meet immediate demand through its existing 165,000 mt/year acetone-based MMA plant in Memphis, Tennessee.

“I don’t see any upside for acetone in 2025,” CMA’s Peh said. “The current situation of market oversupply is expected to persist for at least the next couple of years and margins will remain challenged until capacity additions taper off and demand catches up.”