US IPA buyers rebuff price hike proposals, citing weak demand

25 August 2009 20:36  [Source: ICIS news]

HOUSTON (ICIS news)--US producers of isopropanol (IPA) must bear some of the pain of rising feedstock, as the market is too weak to pass through costs, a buyer said on Tuesday.

“The problem I have with these price announcements is that demand is still pretty damn weak,” one large-volume IPA buyer said. “It will be two years - at best - until we’re even at 80% of where demand was before the falloff.”

Dow Chemical nominated an IPA increase of 9 cents/lb ($198/tonne or €139/tonne), effective on 1 September, citing “significant cost escalation” and supply constraints on feedstock chemical-grade propylene (CGP).

That hike came after Dow’s previous announcement of 4 cents/lb for September was rescinded in favour of its larger proposal amid tightening CGP supply and propylene allocations. The tight propylene market has already prompted price-increase initiatives in other derivative markets.

Two US producers announced propylene sales allocations in August, market sources said.

Pressure from propylene has prompted other producers to propose IPA hikes of 4 cents/lb for 1 September in a market several buyers have repeatedly called “disorderly” and “ugly”.

“As a buyer, I don’t want to settle a price based on fear and speculation,” the large-volume buyer said. “I’d push for holding off until the first week or so of September to see what actually happens [with CGP].”

One customer said the latest price initiatives actually are inhibiting market recovery. If the nominations succeed, then the higher prices could kill demand.

Solvents prices have to slow down,” he said. “Producers are going to have to take some pain and not cover their costs for a while.”

US IPA contract prices for August were assessed at 62-66 cents/lb, according to data from global chemical market intelligence service ICIS pricing.

IPA is an oxygenated solvent used in products including coatings, cosmetics, pharmaceuticals, disinfectants, de-icers, resins, food, inks and adhesives.

Other US IPA producers include ExxonMobil, Shell and LyondellBasell.

($1 = €0.70)

For more on IPA, visit ICIS chemical intelligence
To discuss issues facing the chemical industry, go to ICIS connect

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