Trend Toward Oxygenated Solvents Continues to Define the Market

07 June 1999 00:00  [Source: ICB Americas]

By Peter Landau

Regulatory concerns have reduced the demand for solvents during the past decade, but as environmentally friendly oxygenated solvents continue to displace chlorinated ones, fresh consumption will begin to offset the market's decline.

The use of solvents will continue to drop off dramatically in several key sectors. Analysts expect environmental restrictions to halve the amount of solvents used in coatings. Nevertheless, a happy medium between regulators and solvent manufacturers should keep the industry healthy.

According to the Freedonia Group Inc., Cleveland, Ohio, the decreasing demand for solvents will bottom out at 12.8 billion pounds, valued at $4 billion, in 2001. "The primary factor affecting demand for solvents has been the restrictive environmental climate, with national and international legislation mandating broad changes in solvent use," the consultancy notes.

In 1995, the Montreal Protocol and the Clean Air Act forced the phaseout of several solvents that deplete the ozone layer. In addition, the Clean Air Act limits emissions of volatile organic compounds (VOCs), restricting the use of hydrocarbons, chlorinated solvents and ketones. The Environmental Protection Agency is also seeking voluntary reductions in the use of benzene, toluene, xylenes, methyl ethyl ketone, methyl isobutyl ketone, chloroform and methylene chloride.

A reduction in solvent consumption has occurred in virtually every end market. The largest reductions have occurred in paints, coatings and industrial cleaners. In the US, coatings consume about 4.4 billion pounds of solvents worth $1.2 billion, notes Michael Growney, an analyst for the North Cadwell, N.J.-based coatings consultancy Kusumgar, Nerlfi & Growney.

"Oxygenated solvents are probably going to grow 1 or 2 percent," says Mr. Growney. "Hydrocarbon solvents are probably going to decline 1 or 2 percent." He adds that regulations are driving these markets.

The main suppliers of solvents for coatings, according to Mr. Growney, are the solvent market's largest producers in general. The leading makers of oxygenated solvents, by market share, are Union Carbide, Eastman Chemical Company, Shell and Hoechst. The next tier of producers are Exxon, Dow and Lyondell. Oil companies like Shell, Exxon, Ashland and Citgo are the chief manufacturers of petroleum-based hydrocarbon solvents.

"In the coatings industry, about half of the volume is in hydrocarbon-based solvents, which are the aliphatic and aromatic hydrocarbons," says Mr. Growney. The largest categories of oxygenated solvents are ketones, esters, alcohols and glycol ethers.

"In the ketones, the big ones are MEK, MIBK and acetone," Mr. Growney explains. "The three big alcohols are ethanol, butanol and propanol. The esters are primarily butyl and ethyl acetates. There are some other acetates used in very small amounts, and there are some other specialties."

The focus away from hydrocarbon and chlorinated solvents has stimulated the markets for alcohols, esters, terpenes, some ethers and hydrogen peroxide, according to the Freedonia Group. "Green solvents, such as terpenes and hydrogen peroxide, are fully biodegradable and pose little threat of air pollution or ozone damage, although their uses are rather limited," Freedonia says.

"The overall trend is for fewer VOCs," agrees Mr. Growney. "Solvents are VOCs, so that's an overriding pressure." He expects new regulations to be enacted at the beginning of the next century.

Dow Chemical Company is the world's largest supplier of chlorinated organic products, including methyl chloride (M1), methylene chloride (M2), chloroform (M3), perchloroethylene, trichloroethylene and carbon tetrachloride. Dow's North American capacities are 650 million pounds of M2 and M3, 90 million pounds of perchloroethylene and 130 million pounds of trichloroethylene. Plants are running at maximum rates to meet global demand, according to Mark Tomiko, Dow's senior marketing manager for the products.

"In North America, solvent demand is declining by 2.5 percent per year due to a number of factors including new tighter equipment being used in dry cleaning applications, advanced vapor recovery systems being implemented in metal cleaning, and the impact of regulations, such as OSHA's final ruling (August 1998) regarding methylene chloride and the elimination (December 31, 1995) of 1,1,1 trichloroethane sold into emissive applications by the Montreal Protocol," says Mr. Tomiko. The use of methylene chloride in the manufacture of polyurethane foam is also being regulated.

"Dow is aggressively defending the use of chlorinated solvents in all applications in which solvents can be used safely and comply with environmental regulations," Mr. Tomiko adds. Yet regulations have weakened sales of chlorinated solvents, and other applications, such as M2 polyurethane foam blowing, face severe reductions. "However, we believe that in the long-term, these regulations will promote the safe use of chlorinated solvents and sustain their viability," he says.

Eastman Chemical Company produces several families of oxygenated solvents. Among low-boiling esters, with a capacity of about 300 million pounds for Eastman, ethyl acetate and butyl acetate are the two biggest. "There's a product in that family called methyl acetate," notes Pascal Convers, business market manager for coatings, inks and resins at Eastman. "It was recently exempted as a VOC. Therefore, we believe it has good potential in the coatings as well as the cosmetics area."

Eastman also produces high-boiling esters, though these are much smaller volume than low-boiling esters. In glycol ethers, which are a 250-million-pound market for Eastman in the US, the company is a mid-size player. However, it manufactures a full range of products on the ethylene oxide feedstock side.

Mr. Convers says the oxygenated solvents market has been oversupplied for two years. "However, in the last two months we've started to feel a more balanced market and even tightness on several products," he says. "We are anticipating a potential market price increase." Prices are currently at record lows.

"Across the board in solvents, there is greater supply than demand, which has continued to add a certain amount of pricing pressure," notes Morris Owen, director of sales for Ashland Distribution Company. Mr. Owen says that when the South American and Asian economies were strong and Europe looked like it was recovering, a lot of companies built plants. Once these facilities were completed, however, the economies faltered and the market became glutted.

"Weak foreign economies, primarily Asia and Europe, and soft to steady demand in the US are creating an overbalance of supply versus demand, which puts tremendous pressure on price," adds Michael L. Rademacher, vice-president and general manager of Ashland Distribution Company. "It's a very challenging market."

"We used to export a lot more products to Asia-Pacific, which we can't do any more because of the level of pricing," admits Mr. Convers. "Another potential impact is the exchange rate." The strong dollar prevents domestic manufacturers from selling into Europe, Latin America and Asia-Pacific and receiving healthy returns.

Mr. Convers says regulations are now pushing growth in his solvents business. "There are some competing technologies in the coatings arena--waterborne coatings, powder coatings--but you have to pay a premium to use them," he says. Mr. Convers notes that 25 years ago, skeptics predicted that solvents would not merely decline but disappear altogether. "When you look at the oxygenated solvents, they're growing at 2 to 3 percent per year. You get a good bang for your buck." Union Carbide produces ketones, alcohols and glycol ethers and is a leader in oxygenated solvents. "Supply has been adequate, with a few short-term bumps in the industry," says Neal A. Wyhs, director for solvents and intermediates at Carbide. He adds that during the past few years, the company has completed major investments at several of its solvent facilities, including its manufacture of butyl glycol ethers. Carbide will start up a new butanol unit in June or July.

"Demand has been stronger in North America than we anticipated," Mr. Wyhs says. "We feel that Asia has bottomed out, and there are still concerns with South America's financial problems." He adds that global demand for oxygenated solvents is growing at a long-term rate of 2 to 3 percent. "The trend globally is one of decreasing use of hydrocarbons and increasing use of oxygenated solvents," he says.

Dow Chemical Company supplies chlorinated and oxygenated solvents, and it produces both propylene and ethylene series for its oxygenated line. The company's total worldwide capacity for its p-series and e-series glycol ethers is 600 million pounds.

"The e-series is experiencing demand of 0 to 2 percent, which is very close to GDP," says Ralf Brinkmann, Dow's marketing manager for oxygenated solvents in North America. "Customers are trying to minimize the total number of solvents used and reduce overall costs. The p-series glycol ethers are experiencing growth of 3 to 5 percent per year, which is slightly above GDP."

Lyondell Chemical Company produces propylene glycol-based ethers and acetates. In addition, since Lyondell owns 41 percent of the Equistar joint venture, it also has access to ethylene glycol-based ethers and acetates. Lyondell manufactures 350 million to 400 million pounds of glycol ethers per year worldwide, not including Equistar. "Supply and demand seem to be in balance in the US at this time," says Karen Bowling, the company's commercial manager for solvents and specialties.

The Asian economic crisis has not hurt Lyondell's solvents business. "With regards to the p-series glycol ethers our business has not been affected much by the Asian economic problems. Unlike other solvents, there is not a tremendous amount of exporting of p-series glycol ethers to that region, therefore, there is not a glut of product coming back into the US," notes Ms. Bowling. "However, we are happy to see the recovery happening a little bit faster than had been anticipated, and hope that Asia will be a growth area for Lyondell in the future."

For Lyondell, the solvents market is driven by performance and regulations. "Formulators have become more familiar with the performance properties of the p-series glycol ethers: in many cases these products are the solvents of choice. Especially in cleaners and coatings, the p-series glycol ethers have experienced terrific growth over the past few years," Ms. Bowling says.

"Part of this drive is the change in technology in the market," adds Gail Kelly, development manager for solvents at Lyondell. Ms. Kelly explains that while the coatings industry is moving from solvent-borne to waterborne materials because of regulations, the waterborne products still contain solvents.

"Some of the solvents are glycol ether-type solvents," she says. "People are moving away from using traditional aromatic and aliphatic solvents to the new technologies, which tend to favor oxygenated solvents for technical reasons."

The coatings industry has used solvents for 100 years, but the market is changing. "I think solvents are going to go from being essentially 90 percent of the coatings market 10 years ago to maybe less than half in the future," observes Ms. Kelly.

She says regulations will continue to affect the use of solvents, but she says they will not be as harsh as analysts expected. "My sense is the regulatory push is probably not as severe as people thought it would be five years ago," Ms. Kelly says. "Regulators are coming to realize that they can't establish rules that people can't meet. If you look at some of the regulations that have come out recently, they are very much a collaborative effort between EPA and coatings producers."

< previous article(VIDEO - ICIS news Europe Lunchtime Bulletin 3 November 2009)

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly