OUTLOOK '09: Trough to deepen in US solvents markets

02 January 2009 22:56  [Source: ICIS news]

Hard times for solventsBy Larry Terry and Lane Kelley

HOUSTON (ICIS news)--Sources in US solvents markets appeared certain of little other than continued weak demand and pricing as they looked ahead to next year.

"In general, I feel that the outlook for 2009 ... is highly depressing," said one solvents distributor. "I see continuing economic decline, falling prices and reductions in demand that will come faster than reductions in supply."

Among the more obvious fears, he said, is price instability. Isopropanol (IPA) feedstock chemical-grade propylene (CGP), for example, was settled at 18.50 cents/lb ($408/tonne, €290/tonne) for December, down 10 cents/lb after falling 30 cents/lb for November.

Although some sources said that rate of decline could not be sustained much longer, no one was optimistic about the first half of 2009.

A methyl isobutyl ketone (MIBK) producer forecast diminished demand and lower raw material pricing due to the economic downturn, but said steps including idling capacity and reducing plant operating rates would help suppliers weather the current US recession.

Economic pressures, however, would likely prevail at least through the first quarter of next year, he said. The supplier would not comment on solvents pricing, saying he would observe how demand and orders play out in late December and in January.

He suggested IPA would stabilise during early 2009, and added that propylene would rebound from its steep descent during the period because it is significantly "undervalued".

A buyer of methyl ethyl ketone (MEK) said his company had already revised its 2009 budget twice due to global economic uncertainty and anticipated a 10-20% year-over-year decline in business for the first part of next year.

"We're really not sure of anything past the first half of the year," he said.

The buyer spoke of some hope, however, noting that his company had identified some small pockets of potential growth in a couple of its downstream markets.

In the acetates markets, the prospect for next year is grim.

Few observers see a quick turnaround in current conditions for either ethyl acetate (etac) or butyl acetate (butac), which has seen price cuts in recent weeks after going the other way from most petrochemical prices for much of the year.

Until late November, both solvents seemed largely immune to the plunge in feedstock prices, mainly because of their small markets. But both etac and butac have seen a severe falloff in demand in recent weeks. As with many petrochemicals, the spot market is practically nonexistent.

A turn up in feedstock prices would signal a rise in demand, but that has not happened yet, according to market sources.

In both feedstock propylene and butanol, buyers and sellers expect a continued downward move in prices due to lagging demand, though producers were said to be trying to delay further cuts.

Demand in both etac and butac remains practically nil, as one distributor put it. Producers said they want to take advantage of current cheaper feedstocks but have found themselves with inventory to sell because buyers were waiting for cheaper prices, thus defeating attempts at de-stocking.

"It is now a matter of who blinks first," the distributor said.

Some observers looked for demand to improve early next year because many producers now have such low stocks. But others were not so optimistic, noting that improvement in demand was not likely until March or April of 2009.

Major US butac producers include Dow Chemical, Eastman and Oxea Group.  

Major US etac producers include Celanese, Eastman and Solutia, whose material is marketed by BP.

($1 = €0.71)

For more on isopropanol visit ICIS chemicals intelligence
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By: Lane Kelley
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