OUTLOOK ’11: US solvents to be stable, growth at GDP levels seen

28 December 2010 21:00  [Source: ICIS news]

By Lane Kelley

HOUSTON (ICIS)--Buyers and sellers in the US solvents industry are no longer singing the blues that prevailed a year ago.

The more positive views contrast sharply with the pessimism common at the outset of 2010. As 2011 begins, most sources anticipate a stable-to-slow-growing market.

A butyl acetate (butac) producer noted that demand appeared to be solid from strong sales in the automotive and paint sectors. The producer said it expected around 3% growth in 2011, at least in line with GDP levels.

A butac buyer said he was even more optimistic and expected "a very good year," but was quick to point out that the optimism was based on a special case regarding a very large customer. But the buyer said he knew of many customers and competitors that were stocking up on enough material  to get them not only through year-end but also a few weeks into 2011.

For some solvents makers, the new year started as early as the fall of 2010.

Specialty chemicals giant Celanese, which makes ethyl acetate, said the surge in global methanol prices in October and November gave its acetyls business a boost and created what CEO David Weidman called "a very healthy environment for the acetyls business."

Some US methanol sources said they were stumped about what had caused the methanol jump. But Methanex CEO Bruce Aitken attributed the surge to increasing methanol exports to China because of low production and inventory levels at the country's 250 methanol plants.

Supply and demand in the isopropanol (IPA), methyl ethyl ketone (MEK) and methyl isobutyl ketone (MIBK) markets were expected to remain in relative balance at least during the first half of 2011, sources said.

Raw materials will continue to be key price drivers in all three markets, with chemical grade propylene (CGP) already poised for a January contract increase of as much as 6-11 cents ($132-$243/tonne, €100-185/tonne), according to some market sources.

“Everybody’s flat to up for the first half of the year,” a solvents buyer said. “Prices are not going down, that’s for sure.”

While upward price pressure was anticipated through the first half of the year, few would speculate beyond that.

“For 2011, the MEK market is not expected to fluctuate wildly,” a large buyer said. “Obviously being fed by the butylenes stream, MEK will listen to crude oil pricing. But apparently with MEK pricing where it is right now ($100-104 cents/lb), the margin is acceptable while crude is below $100/bbl.”

Sources said the IPA and MIBK markets were not likely to be particularly volatile beyond reactivity to their respective primary feedstocks - CGP and acetone.

Buyers said imports would not play a major role in domestic price movement until US prices rise significantly.

“Domestic prices are not high enough to attract cheaper imports,” the buyer said, but he would not speculate on just how much higher domestic pricing would have to rise to spur such interest.

“It also depends on what’s going on over there,” he said. “It’s all a moving target.”

US IPA producers include Shell, Dow Chemical, ExxonMobil, LyondellBasell and Eastman.

US MEK producers include Exxon and Shell, and US MIBK producers including Dow Chemical, Eastman and Celanese.

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

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

($1 = €0.76)

Additional reporting by Larry Terry

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By: Lane Kelley
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