Specialty Chemicals Insights: Ethanolamines

20 September 2004 00:01  [Source: ICB Americas]

The market for ethanolamines continues to tighten in the wake of production difficulties, a lack of spare capacity and demand that has been much stronger than expected. Producers are launching a spate of price increases and expect the market to remain tight or even be sold out through at least 2006.

Victor Haag, business manager, ethanolamines and alkyl phenols, at Huntsman Corp., says the market for ethanolamines (EOAs) is very tight. “Huntsman has been on 100 percent allocation since February,” he says. “The full impact of the growth of ACQ (ammoniacal copper quaternary), a wood preservative containing MEA (monoethanolamine), has been realized beginning in the second quarter, and that growth exceeded expectations by about 20 percent.”

Mr. Haag estimates that year-over-year demand for MEA has increased by around 100,000 metric tons, and DEA (diethanolamine) demand, which is growing “at a couple of points above GDP rates,” is strong because of continued growth in the agricultural market.

“Buyers’ thought-process is changing from, ‘How do I get the lowest possible price’ to ‘How do I make sure we get the material we need at an acceptable price,’” he says. “Additional growth in the TEA (triethanolamine) market with new US applications for TEA has made the supply of all EOA homologs tight. Several of our customers have reported that the other US producers have announced sales allocations to the market in 2003 that have not been removed because of various operating and production reasons.”

Mr. Haag expects the tight supply-demand balance to last through at least 2006. “No new major capacity expansions are expected over this time frame,” he says. “Every producer is studying how to make a few more pounds by debottlenecking existing plants. With the current tightness between supply and demand, any significant unplanned outage of either ethanolamine facilities or ethylene oxide facilities will result in a shortage.”

Ken Bromfield, Dow Chemical Company’s global marketing manager for ethanolamines, also says the market is extremely tight because of both strong overall demand and MEA’s new use in wood preservatives. Assuming demand stays strong, Mr. Bromfield says the market should remain tight and probably be sold out in 2005 and 2006.

“It takes two to three years to build a new ethanolamines facility, and we haven’t seen any announcements of a plant,” Mr. Bromfield says. “There’s a new use for TEA in fabric softeners, and that technology could come from Europe to the US, tightening the market even more.” He adds that several producers, including Dow, have had production problems. Dow was on force majeure but is back up and running full out.

Morton Aubrey, Ineos’s business manager for ethanolamines, says that in North America, demand for the products in trade applications will climb by 30 percent this year, and captive requirements will increase by 5 to 6 percent. Exports will be forced to decline to accommodate the expansion in domestic demand. Last October, Ineos debottlenecked its plant in Plaquemine, La., raising its nameplate from 270 million pounds to 350 million pounds.

Ethanolamines consumption in Europe is up roughly 5 percent versus last year, he adds. Asian demand is growing at a 10 percent annual clip, driven largely by China, and demand in the rest of the world is rising at roughly a 5 percent yearly rate. “I expect growth in North America, Europe, Latin America, South America, the Middle East and Africa to grow by 4 to 6 percent in 2005,” he says. “Growth in Asia should remain at 8 to 10 percent next year.”

In North America, demand for ethanolamines’ core applications remains strong and continues to grow. In addition, “there has been a significant—order of magnitude—increase in demand for MEA in what was formerly a niche wood-preservative application,” Mr. Aubrey says. “Demand for DEA into herbicides, which rebounded nicely in 2003, has passed levels that the market saw prior to the application’s severe contraction in 2002. TEA demand has grown in adhesives and binders applications. Finally, amine-bottoms sales into its core, cement application have continued to grow thanks to the ongoing construction boom within the US. Captive demand for ethanolamines, notably MEA used as a raw material for ethyleneamines, is also increasing at very sound rates.”

Mr. Aubrey says that in Western Europe, MEA and DEA are balanced, but TEA is snug because of its growth in fabric softeners. “TEA growth has been this region’s stand-out performer,” he says. “Captive requirements—largely MEA into its ethyleneamine derivative—are growing nicely.”

In Asia, the Japanese market is stable and growing at low rates. However, China “continues to witness profound demand growth driven by surfactant, herbicide, and cement applications.” Chinese ethanolamine imports rose by 45 percent in 2003, and that country’s domestic producers are operating at high rates.

Huntsman’s Mr. Haag rates global demand for ethanolamines at around 1.3 million metric tons. Nominal global capacity is roughly 1.4 million metric tons, and effective capacity is about 90 percent of nominal capacity. “Excluding the step change in MEA demand in North America, ethanolamine demand normally grows at near GDP with some market segments flat—lubricants for example, and some market segments, such as agricultural applications growing at much higher rates.

Energy and feedstock costs have hurt margins and forced producers to raise prices throughout the year. Margins have improved relative to 2003, says Mr. Haag, but are still not strong enough to justify building new production plants or significantly expanding existing ones. He adds recent run-ups in oil and feedstock costs are especially worrisome.

This year, Huntsman launched price increase of 3 cents per pound for MEA, DEA and TEA for January 1, April 1 and June 1. The company followed with a 5 cent increase for MEA and 3 cent increases for DEA and TEA, effective July 1, and it has announced a 3 cent increase for all three products for September 1.

“The market seems to have accepted these increases,” Mr. Haag says. “If raw material and energy prices hold at current levels, I would expect to see further increases.”

Huntsman’s consumer list prices for standard grades of ethanolamines, effective September 1, are 81 cents, 86 cents, and 80 cents per pound for bulk full rail cars or full trucks of MEA, DEA and TEA, respectively, delivered in states east of Montana, Wyoming, Utah and Arizona. “Most large bulk end consumer prices are discounted off of list, but those discounts have materially shrunken since the late 1990’s and early 2000’s, when prices reflected significant oversupply,” Mr. Haag says.

Dow has announced a September price increase 8 cents per pound for MEA and 5 cents for DEA and TEA. This follows a July 1 increase of 8 cents for MEA and 5 cents for DEA and TEA. For the year, the company has raised its prices for MEA by 22 cents per pound, and its prices for DEA and TEA by 16 cents.

Ineos’s consumer list prices for bulk tank truck deliveries in the Gulf Coast area are 75 cents per pound for MEA, 80 cents for DEA and 74 cents for TEA. In 2003, the company announced off-list price increases for all homologues of 5 cents per pound on March 1, 3 cents on April 1, 3 cents on June 1 and 3 cents on November 1. This year, the company had a 3 cent off-list increase on January 1, and a 3 cent list and off-list increase on April 1. Ineos raised list and off-list prices on July 1 and again on September 1 by 8 cents per pound for MEA and 5 cents for DEA and TEA.

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