OUTLOOK ’12: Asia 2-EH prices seen bearish as China’s import drops

09 January 2012 03:14  [Source: ICIS news]

By Quintella Koh

SINGAPORE (ICIS)--2-ethyhexanol (2-EH) prices in Asia may come under considerable pressure in 2012, as China’s 2-EH import requirement is estimated to decline in the wake of new world-scale capacities that the country is building, industry sources said.

Several regional producers and traders said that as China moves to increase its 2-EH supply base – domestic output to increase by 328,000 tonnes to 1.13m tonnes - the market will become less of a “sellers market”.

Asian 2-EH sellers typically hold a stronger bargaining power, as the petrochemical product is net deficit in Asia, industry sources said.

“Sellers will however experience a shift of bargaining power moving into 2012 and 2013, as China self-sufficiency ratio increases,” said a northeast Asian buyer.

According to Chemease, an ICIS service in China, the country’s 2-EH import volume in 2012 will be around 150,000 tonnes, down 182,000 tonnes, or 54.8%, from its import volume in 2011. In 2010, China imported 465,000 tonnes of 2-EH, ICIS-Chemease data shows.

A northeast Asian producer said based on its company’s internal data, it estimates that China’s self-sufficiency ratio for 2-EH had increased from 60% in 2010 to 71% in 2011.

The producer estimates that China’s 2-EH self-sufficiency ratio could hit 73% in 2012 and 82% in 2013.

ICIS-Chemease data shows that in 2011, China produced 802,000 tonnes of 2-EH, up 239,000 tonnes from 2010 while in 2012, China’s 2-EH production is expected to reach 1.13m tonnes, up 328,000 tonnes from 2011.

China’s downstream demand will continue to outpace its domestic 2-EH supply, ICIS-Chemease data shows.

2-EH is used primarily in the production of dioctyl phthalate (DOP). DOP is added as a plasticiser in the production of polyvinyl chloride (PVC). PVC is used heavily in the manufacture of construction materials such as door and window frames, pipes and cables.

China’s 2-EH demand will reach 1.27m tonnes in 2012, up 144,000 tonne from 2011.

In 2011, China’s 2-EH demand stood at 1.13m tonnes, up 107,000 tonnes from 2010.

Demand from the plasticisers industry will account for around 87% of the demand for 2-EH, while the demand from 2-ethylhexyl acrylate (2-EHA) will account for approximately 10% of the demand for 2-EH.

A bulk of new capacity of 2-EH will be added in is Shandong, a province on the eastern coast of China. The province will be home to 560,000 tonnes of new 2-EH capacity in 2012 to 2013, ICIS-Chemease data shows.

Shandong Lanfan Chemical is expected to start up its 140,000 tonne/year 2-EH plant this year.

Meanwhile, Shandong Hualu Hengsheng Group, Shandong Luxi Chemical Co and Xingxia Petrochina are scheduled to start up new 2-EH plants in the period 2012 to 2013. These three plants can each produce 140,000 tonne/year of 2-EH.

Other provinces that will house new 2-EH capacities include Heilongjiang and Sichuan.

In Heilongjiang, Daqing Petrochemical Company is scheduled to complete its 2-EH expansion this year.

The company aims to increase its 2-EH capacity to 125,000 tonne/year from 50,000 tonne/year, ICIS-Chemease data shows.

In Sichuan, China National Petroleum Corporation (CNCP) aims to bring onstream a new 80,000 tonne/year 2-EH plant in 2013.

Asian producers had grappled with weak profit margins for most of last year. In 2011, Asian producer saw their profit margins plummet from an annual peak of $394.70/tonne (€312/tonne) on 18 February to -$43.95/tonne on 2 December. (please see chart below)

For each tonne of 2-EH produced, 800kg of propylene and 200kg of naphtha is required. In addition, an average conversion cost of $250/tonne is added onto the production cost.

Asian producers said 2-EH’s performance at the start of this year appears to be a harbinger of tough times to come.

On 6 January, Asian producers started off the year with seeing profit margins of $64/tonne, a far cry from 2011, when they started off the year with profit margins of $388.90/tonne.

“Producers usually make very good profits selling 2-EH as the product is structurally very tight in Asia. However, with China ramping up on its self-sufficiency ratio, 2012 will be a challenging year,” said a trader.

As testament to the tough times producers are anticipating, there were no new projects announced elsewhere in Asia.

“No one is willing to take the risk to invest in new projects or expand on their capacities now. Most producers will probably be in a wait-and-see mode in 2012 and 2013 to ascertain how the situation in Asia will pan out,” said a second northeast Asian producer.

($1 = €0.79)

Please visit the complete ICIS plants and projects database
For more information on 2-EH, visit ICIS chemical intelligence
Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Quintella Koh
+65 6780 4372

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