28 March 2012 16:29 [Source: ICIS news]
Correction: In the ICIS story headlined "INSIGHT: Supply constraints to drive global oxo-alcohols market" dated 28 March 2012, please read in the second paragraph ...Germany-based oxo-chemicals producer OXEA said business had improved in the first two months of the year... instead of ...Germany-based oxo-chemicals producer OXEA said last month that business had improved in the first two months of the year. A corrected story follows.
By Abache Abreu
Germany-based oxo-chemicals producer OXEA said business had improved in the first two months of the year despite significant increases in raw material prices.
On reporting its latest financial results, it said average monthly sales volumes in January and February had increased by 8.1%, while revenues grew by 9.5% compared to the fourth quarter of 2011, partly because of restocking activities by its customers.
The positive trend is expected to continue throughout the second quarter, as low inventories and the start of the turnaround season are likely to support producers’ attempt to pass on rising upstream propylene costs to their customers.
However, real global consumption of oxo-alcohols, which are mainly used in the construction, appliances and automotive industries, remains sluggish, with only a marginal recovery from the exceptionally low levels seen during the second half of 2011.
The outlook offers little consolation, as global demand is expected to remain below pre-crisis levels for the rest of this year, driven by depressed conditions in the key downstream construction industry.
In the European market, demand started to shrink from mid-2011, when customers became hesitant to commit to large quantities, given low downstream demand and eurozone economic uncertainty.
Recession fears prompted many customers to reduce stocks to minimum levels, and prices dropped on poor buying interest, ample availability and strong domestic competition, with butanol values hitting a 20-month record low in December.
During the first quarter of 2012, low inventories have led to restocking across the chain, while production constraints have tightened availability and led to greater price increases than those suggested by rises in feedstock propylene costs.
However, most producers are unable to comment on real demand levels, as in most cases inventories are only enough to supply regular customers.
“When you have major disruptions in the market it appears that you can sell everything you possibly can, but there is always the question of whether demand is real,” a producer said.
The outlook for the next six months points to balanced-to-tight conditions and firming prices, as turnarounds have been scheduled at Europe’s five largest oxo-alcohols suppliers during the industry’s peak season of April-September.
“Spring and autumn [in
The fourth quarter of 2012 could bring supply shocks across the chain, as the end of the turnaround season is to coincide with the start of the year-end destocking cycle.
The extent of the downturn will depend not only on the general economic outlook, but also on whether softening domestic demand and rising inventories can be at least partly compensated by higher export volumes to the key net-importing Asia-Pacific market.
Through most of 2011 and this far in 2012, the high price of propylene contracts in
The key downstream paints, coatings and plasticiser markets have not recovered to any significant extent since the 2009 recession, partly because of depressed conditions in the construction sector, but supply constraints are expected to help producers maintain margins in the face of higher propylene and energy costs.
In addition, US-based oxo-alcohols producers enjoy greater opportunities to offset domestic downtrends with export activity than their European counterparts.
In December 2011, during the industry’s slow season, the
In the Asia-Pacific market, spot prices increased at the beginning of the year, as buyers were keen to secure January and February cargoes in anticipation of rising spot prices and tightening supply towards the end of the first quarter.
However, the upward trend in prices was short-lived and values dropped in February on slow demand from the key downstream markets of plasticisers, acrylates and solvents.
Consumption in the Chinese market, a key driver of Asia-Pacific prices, has not shown signs of a significant recovery, but the turnaround season of April-June is likely to reduce availability, while imports from the
($1 = €0.75)
Additional reporting by Frank Zaworski and Cheong Su Yeen
Follow Abache Abreu on Twitter
For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.
Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.
|ICIS news FREE TRIAL|
|Get access to breaking chemical news as it happens.|
|ICIS Global Petrochemical Index (IPEX)|
|ICIS Global Petrochemical Index (IPEX). Download the free tabular data and a chart of the historical index|
Asian Chemical Connections