OUTLOOK '09: Europe solvents face sluggish start to the year

29 December 2008 16:03  [Source: ICIS news]

By Heidi Finch

LONDON (ICIS news)--The solvents industry can expect a slow start to the year and it was difficult to predict when demand would return, market players said.

“It will probably be a slow start to 2009 and we anticipate that growth will be flat in Europe over the whole of the year,” said a producer of propylene glycol ethers. This sentiment was echoed by several other market players in the European solvents industry.

The hope for many suppliers is that consumers “will run dry and start to buy again”, but it was difficult to anticipate the timing of when demand would return and was likely to differ according to product.

An integrated producer of glycol ethers and propylene glycol ethers said: “It is a tough call to say when demand returns, but the supply chain is empty.”

For methyl ethyl ketone (MEK) and isopropanol (IPA), European producers were still quite optimistic about the first quarter, saying that the broad range of end-user applications was more likely to minimise any negative economic effects on demand.

“We expect some slight downturn, but not a considerable one,” said one manufacturer.

The slowdown in early 2009 was expected to be more pronounced in the European methyl isobutyl ketone (MIBK) market, added the same seller, noting that one of the main outlets was the automotive industry which had been severely affected by the economic slump.

There was a similar situation in the ethyl acetate sector. “Until we see an improvement in construction and automotive industries, we are going to have to take it day by day”, said a producer.

Extended Christmas plant closures due to the softer market conditions were likely to make the start to 2009 a sluggish one, said other industry participants. 

“January will probably be a difficult month, with several manufacturing units not expected to restart before mid-January,” said a reseller.

“Destocking and production cutbacks are likely to balance out during the first quarter 2009 and provided demand returns, there will hopefully be some light at the end of the tunnel by quarter two,” added the same source.

“January will be an important month psychologically, then there could be the disruption of the Chinese New Year in February, meaning it will be the end of quarter one before we get an idea of the true direction for 2009,” added another solvents player.

Aside from concerns about demand, falling upstream costs were also likely to put further downward pressure on solvent prices in the first quarter, stressed buyers.

This was particularly in view of the anticipated ‘historic decreases’ in the olefins sector for the first quarter, along with the recent downward slide in crude and naphtha pricing.

Many market players found it difficult to commit to any kind of forecast for the first quarter, let alone for the rest of the year.

“We are still in the dark, there is a lot of uncertainty and nervousness about 2009 [due to the economy],” said one reseller.

“It is always difficult to predict in a ‘normal’ environment, let alone the unprecedented one we are in now,” said a manufacturer.

“We try to stay positive,” said another seller.

Aside from the economy, players were also keen to monitor the impact of changes to production, following the recent closure of Shell’s Deer Park solvents plant in the US at the end of 2008.

Added to this, was speculation about the possible closure of LyondellBasell’s solvents production at Berre, France, in 2009, although the company declined to comment about this, as well as Sasol’s MIBK expansion plans in South Africa, which were due to be completed in the second half of 2009.

“We expect MIBK [demand] to normalise during the course of 2009 [provided the economy improves] and with the changing structures we expect to see a new balance only by the end of 2009,” said one manufacturer.

Additional reporting by Jane Massingham
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By: Heidi Finch
+44 20 8652 3214

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