Ethanolamines Face Oversupply and Raw Material Cost Pressures

18 June 2001 00:00  [Source: ICB Americas]

The ethanolamines (EOA) market is facing challenging times. High raw material costs are putting a squeeze on margins in the US and other regions. At the same time, the market is oversupplied following recent global capacity expansions and improvements initiated by most producers.

Recent price increases by the major producers in the first two quarters of this year have restored some margin lost to a run-up in raw material costs. All North American ethanolamines producers increased their EOA prices by 5 cents per pound on January 1 and 3 cents per pound on April 1, bringing current prices between 54 cents and 61 cents per pound for direct consumers. Schedule prices for monoethanol-amine (MEA), diethanolamine (DEA) and triethanolamine (TEA) are 59 cents, 67 cents and 61 cents per pound, respectively. Major producers in the US are Dow Chemical, Huntsman, Ineos and Equistar.

Despite the increases, producers still point to margin problems. "The ethanol-amines business is not that profitable today with soaring ethylene costs. The huge increases in raw material costs have not been passed on in ethanolamines prices," says Victor Haag, business manager of ethanolamines and alkyl phenols at Huntsman.

"Raw materials and energy costs are at historically high levels, and these have negatively affected profit margins," notes one Dow official. Ethanolamines are produced by reacting aqueous ammonia and ethylene oxide. Ethylene oxide accounts for 77 percent of total ethanolamine production cost, and its price generally tracks the price for ethylene feedstock.

The supply and demand balance, according to the Dow official, also drives ethanolamine prices. Demand for specific homologues, such as DEA, continues to be strong, and supply is getting tighter. "Current availability of DEA is tight relative to the other EOA derivatives, such as MEA and TEA, although new uses for MEA continue to develop in surfactants, personal care and gas purification," says the official from Dow.

Although MEA usually accounts for about half of total EOA production followed by DEA, demand for DEA exceeds that of MEA and TEA with growth at more than 5 percent. DEA demand is being driven by the production of an intermediate in glyphosate herbicides, and according to industry sources, will drive future US EOA growth. Current global total EOA demand is growing between 4 to 6 percent annually with MEA and DEA demand growth rates substantially exceeding that for TEA.

"Total demand this past year in the Americas, Western Europe and Asia/ Pacific slightly exceeded 1.9 billion pounds. Trade demand alone in these regions totaled approximately 1.5 billion pounds," says an Ineos official. Ineos' share of trade demand in those regions, according to the official, was slightly less than 20 percent.

Still, most producers agree that the present balance is tipped off by exceeding supply for EOA in general. Currently, supply exceeds demand due to recent global expansions and capacity improvements, and the oversupply situation will continue to be long through 2002 with new production units' start-ups.

BP announced expansion of its ethanolamines capacity in Lavera, France, last year from 32,000 tons to 53,000 tons per year, which is expected to be completed by the end of June. Dow's joint venture in Malaysia, Optimal Group, will add additional global capacity with its ongoing construction of its 600,000 ton integrated chemical complex in Kerteh, Malaysia, which includes ethanolamines production capacity. The complex is scheduled to start up late this year.

"By the end of this year, we expect global EOA capacity to exceed 2.9 billion pounds. Approximately half of that capacity will be located in the Americas, more than 30 percent in Europe and with the balance located in the Pacific Rim and the Middle East," says the Ineos official.

Prior to acquiring Dow's EOA business, Ineos had announced plans to build a grassroots EOA plant in Antwerp, Belgium, but that has been put on hold as Ineos is exploring other options for its new EOA facility in Plaquemine, La., acquired from Dow. "Timing for the EOA project is being reviewed as we are exploring debottlenecking options at our Plaquemine site," says the company official.

Ineos had acquired Dow's global EOA business as well as its North American GAS/SPEC gas treating amines businesses in February as part of a Federal Trade Commission mandate from the Dow-Union Carbide merger. Dow is now operating the former Union Carbide's ethanolamines business, which includes plants in Seadrift, Tex., and Taft, La.

Meanwhile, Huntsman and Ahmad Hamad Al-Gosaibi & Bros. Group of Saudi Arabia are also exploring the possibility of building a major petrochemical manufacturing facility at Al-Jubail, Saudi Arabia, which will initially focus on the 50,000 ton production of ethylene oxide, ethanolamines and ethoxylates for the surfactants industry. The two companies expect to complete the feasibility study by mid-2001.

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