Oxo-alcohols supply to stay tight in 2007

08 January 2007 00:00  [Source: ICB]

European oxo-alcohols producers are looking forward to a smooth year as recent closures will restrict supply and upstream costs look set to remain high.

"Products are tight along the chain," says one major producer. "Any hiccups in production and they will have an immediate impact."

"The market in 2007 will depend far more on supply and demand than on upstream costs," says another, quoting a tight stock position on dioctyl phathalate (DOP) and 2-ethyl hexanol (2EH) in particular.

Another 2EH producer reports a sold out position for the whole of 2007.

Sources agree that it is mainly due to the capacity closures that the oxo-alcohols market is so buoyant.

BASF's definitive closure of its 200,000 tonnes/year 2EH plant at Ludwigshafen, Germany, in the third quarter of 2005 and European Oxo's closure of its 250,000 tonnes/year butanols output in Marl, at the end of that year affected the market balance significantly in 2006, leading to record high prices in the butanols market.

Upstream butyraldehyde capacity was also closed, leading to a particularly tight isobutanol position in Europe.

With no imminent change in capacity worldwide, players expect the current trend to continue throughout 2007.

The next new butanols output planned globally is due to go online in Taiwan in 2008.

Buyers reluctantly agree with producers' analysis of the market. One large buyer admits that although some lower prices may be possible on the back of the first quarter reduction in propylene, security of supply is imperative this year.

The propylene decrease is expected to have a limited softening effect on pricing this quarter, but producers are confident that they will be able to hold on to some of the €45/tonne ($59/tonne) propylene drop due to the balance of the market.

Shutdowns at propylene units during the first half of 2007 are expected to maintain pressure on strong monomer pricing.

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