Chemical Profile

24 September 2001 00:00  [Source: ICB Americas]

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PROPYLENE GLYCOL   September 24, 2001

PRODUCER

CAPACITY*

Arch Chemicals, Brandenburg, Ky.

75

Dow, Freeport, Tex.

275

Dow, Plaquemine, La.

260

Huntsman, Port Neches, Tex.

120

Lyondell, Bayport, Tex.

550

Total

1,280



*Millions of pounds of propylene glycol (PG) per year. Commercial production of PG is by hydration of propylene oxide. Di- and tripropylene glycols, as well as small quantities of higher glycols, are also produced in the reaction. Propylene glycol capacities at some locations can be supplemented by shifting hydration equipment normally used for ethylene glycol to the production of PG. Arch Chemicals was spun off by Olin Corp. as an independent company in February 1999. The previous year Arch was organized as a wholly owned subsidiary of Olin. Lyondell Chemical purchased the Arco Chemical Company in 1998, acquiring the PG plant in Bayport, Tex. At the end of last year, Eastman Chemical withdrew from the market and ceased manufacturing PG in South Charleston, W. Va., eliminating 72 million pounds of capacity. Among the four remaining US producers of PG, only Arch is not back-integrated into propylene oxide. Profile last published 7/20/98; this revision 9/24/01.

DEMAND
2000: 871 million pounds; 1999: 854 million pounds; 2004:943 million pounds.
Demand equals production plus imports, which were 43 million pounds in 1999 and 32 million pounds in 2000, less exports, which were 274 million pounds in 1999 and 262 million pounds in 2000.

GROWTH
Historical (1995-2000): 2.0 percent per year. Future: 2.0 percent per year through 2004.

PRICE
Historical (1995-2000): High, 65c. per pound, list, industrial grade, tanks, f.o.b. works; low, 60c., same basis. Current: 68c., same basis.
Contract prices are about 10c. per pound below list price.

USES
Unsaturated polyester resins, 27 percent; functional fluids (antifreeze, de-icing, heat transfer), 20 percent; food, drug and cosmetics uses, 20 percent; liquid detergents, 17 percent; paints and coatings, 5 percent; tobacco humectant, 2 percent; miscellaneous, including plasticizer use, 9 percent.

STRENGTH
Propylene glycol's growth in cosmetics and liquid detergents continues to be strong, respectively growing at 3 and 3.5 percent annually. Cosmetic producers require USP grade material and use this in their emollient bases for personal care products, such as antiperspirants and deodorants, suntan lotions, shaving creams and beauty ointments. In liquid detergents, PG acts as an enzyme stabilizer and solvent. Although liquid detergent growth has slowed in recent years, these products are still taking share from powder detergents, as well as enjoying their own organic growth.

WEAKNESS
Propylene glycol's yearly growth has been nearly 5 percent over the past decade, but during the coming decade, its growth should drop to 2 to 2.5 percent. Producers blame the current slowdown on the poor shape of the US economy this year and the maturation of the aircraft deicing market, where the substitution of propylene glycol for ethylene glycol has largely run its course. In unsaturated polyester resins, PG's largest application, market share continues to erode because of competition from dicyclopentadiene-based resin.

OUTLOOK
US consumption of PG has previously reflected GDP growth, which means that this year will see a contraction in total demand. Long term, growth will probably be no greater than 2.5 percent annually as nearly all PG applications are mature. The propylene glycol market is under severe pressure because of the run-up in natural gas costs. Although gas prices have eased since last winter when they reached above $10 per million BTUs, gas pricing is now about $3. But this is still significantly above the traditional level of $1.50 to $2 per million BTUs. Producers' margins are being squeezed and profitability is down. Future growth is projected to be 2 percent annually through 2004.





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