Europe IPA prices may fall after Shell debottleneck

26 June 2006 15:23 [Source: ICIS news]

LONDON (ICIS news)--European isopropanol (IPA) buyers said on Monday they were hopeful a 50,000 tonnes/year debottlenecking of the Pernis, Netherlands plant owned by Shell, Europe's largest producer, would lead to a fall in spot prices.

Some consumers and resellers said prices could take a dive if additional volumes appeared on the market and suppliers tried to cling to their market shares. The chance of a significant oversupply could increase if demand drops in summer, as is traditionally the case in parts of Europe, they added.

But producers said the narrow differential between propylene and IPA prices was already a concern and upstream costs would allow no room for lower IPA prices following the recent Q3 propylene settlement at €830/tonne FD NWE, up €5/tonne.

A source from Shell said it was not in any seller’s interests to cause a price war and added it intended to run its global IPA production in line with demand to prevent an oversupply. The most immediate consequence of this would be a reduction of rates at its Berre plant, which ran hard to cover the loss of output while work was carried out at Pernis.

IPA spot prices rose €40/tonne in April on the back of the €40/tonne Q2 propylene increase and the expectation of tighter IPA supply ahead of Shell’s maintenance, which kicked off on 22/23 April. Prices reached a year-high in late April at €920-940/tonne free delivered (FD) Northwest Europe (NWE), according to global chemical intelligence service ICIS pricing.

However, prices dipped in May and June with ample supply meeting weak demand, and high feedstock costs seemingly playing little part in price evolution. On Monday, spot prices were reported at €890-910/tonne, €30/tonne down from April.

The 300,000 tonnes/year Pernis plant, which was ramped up last week, together with Shell’s other 110,000 tonnes/year IPA plant in Berre, France now means the the company's capacity represents 65% of total European domestic output.

Sasol is the only other European producer, with two units in

Germany

, although imported volumes are regularly seen from US suppliers ExxonMobil and Dow Chemical.

By: Edward Cox
+44 20 8652 3214

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