01 November 2010 00:00 [Source: ICB]
Phthalic anhydride (PA) is used mainly for phthalate plasticizers, which account for just over half of all PA production. The main product is dioctyl phthalate (DOP), which is a plasticizer used in the production of polyvinyl chloride (PVC).
The next-largest use of PA is in unsaturated polyester resins (UPRs), which account for approximately 18% of PA production. UPRs are used in making fiberglass-reinforced resins. The third-largest PA outlet is alkyd resins. These are employed in solvent-based coatings.
Because the majority of PA consumption is in PVC, its growth is dependent on that market. Lately, PVC has been sensitive to general economic conditions after undergoing significant negative impact from the fall of the housing, construction and automobile industries since the economic downturn in 2008.
In North America, PA consumption in plasticizers is forecast to grow by an average of 1%/year from 2009 to 2014, according to US-based consultancy SRI Consulting. Demand is expected to remain weak during 2010, with the automotive and construction sectors dragging down overall demand.
US PA producers have said demand was steady to weaker. Market participants have also said market conditions were unlikely to change until the second half of December.
During the week ended October 19, market players said US contracts for PA were reported as being set to move up by 2 cents/lb ($44/tonne, €32/tonne) in November, following stronger feedstock prices.
The price increase was driven by higher feedstock orthoxylene (OX) settlements for October contracts. October OX settled up by 3.5 cents/lb at 49 cents/lb, a third consecutive increase based on stronger mixed xylenes (MX) prices, as assessed by ICIS.
In September, PA contracts rose by 1 cent/lb, reversing a 2.5 cent/lb drop in August contracts, which was driven by a previous reduction in OX. OX contracts rebounded by 1 cent/lb in August, after having dropped for two consecutive months, and had settled at 43.5 cents/lb. Meanwhile, PA had settled at 58-66.5 cents/lb FOB (free on board) for molten grade in August.
PA was first made through the oxidation of naphthalene in concentrated sulfuric acid and in the presence of mercury sulphate. A catalytic vapor-phase oxidation of naphthalene later replaced this earlier route. The latter process is done in air, in the presence of a vanadium oxide catalyst.
Today, OX has superseded naphthalene as the feedstock. Naphthalene now provides only about 16% of feedstock requirements. In the US, all production of PA is now from OX feedstock.
The process technology has changed little, although catalysts have a longer life of three years and yields have improved. One developmental improvement was the lowering of the air-to-OX weight ratio to 9.5:1, which allows for energy savings and a reduction in capital costs.
In the week ended October 26, the National Association of Realtors said US sales of existing homes rose by 10% for the month of September, pointing to an early stage of housing market recovery. The gain exceeded the 7.6% increase in August and was nearly double what analysts expected, as assessed by ICIS.
US home builders have been moderately more confident about the housing market, which has long been suffering from the economic downturn. However, builders' expectations remain near record lows, according to trade group the National Association of Home Builders.
Housing and construction are key end-consumer markets for PA via the use of PVC, the main outlet for PA. However, challenges in PA's future include health and environmental issues that surround phthalates used in plasticizers for PVC, which could hinder growth prospects.
In North America, demand for PA is expected to have moderate growth in UPRs and declining demand in alkyd resins.
Profile last published August 28, 2006
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