24 September 2012 11:50 [Source: ICB]
Phthalic anhydride (PA) occurs as a white solid in various forms or a clear molten liquid, with an irritating odour. It is slightly soluble in hot water, hydrolysing to phthalic acid, and is soluble in alcohol and carbon disulphide. It reacts with strong oxidants and violently on heating with copper oxide or sodium nitrite, causing an explosion hazard.
The second-largest outlet is in unsaturated polyester resins (UPR), which are usually blended with glass fibres to produce fibreglass-reinforced plastics. Principal markets are construction, marine and transportation.
The third-largest outlet is PA-based alkyd resins, which are used in solvent-based coatings for architectural, machinery, furniture and fixture applications. Small volume uses for PA include the manufacture of dyes, pigments, detergents, herbicides, insecticides, fire retardants and saccharin.
Market participants said US PA demand continues to be a bit soft, after a slowdown during the summer due to a seasonal lull in the downstream plasticizer industry. Demand is projected to strengthen in September until late November, as PA demand usually drops off going into winter due to the seasonality of some business.
According to a major PA buyer, one reason demand slows during the summer is that many moulders and composites companies have extended shutdowns.
Following this seasonal slowdown, sources said US PA supply had seen no constraints during the summer, even after the arrival of Hurricane Isaac to the US Gulf coast. Supply was instead described as balanced.
No major changes are expected to US PA supply and demand during the fourth quarter, other than year-end inventory reductions. According to a major producer, US PA volumes are steady.
Other sources said that in the US, there is more capacity than demand. So it is only a matter of the producers maintaining production rates to ensure they meet customer requirements based on their market knowledge for the fourth quarter.
European PA supply continues to be more limited than usual because of a number of outages across the region. Kemiplas's 20,000 tonne/year PA plant in Hungary remains shut and the company is unable to confirm when the facility will be restarted.
US PA prices follow the previous month's US orthoxylene (OX) contract price, as OX is its main feedstock.
PA prices in June, July and August decreased, following lower OX prices. However, PA prices rebounded in September, following an increase in the US OX August contract. September PA contracts were assessed higher by 6 cents/lb at 81-88 cents/lb FOB (free on board) for molten grades, and 82-89 cents/lb DEL (delivered) for flake grade.
The September OX contract settled at a 2 cent/lb increase, which indicates October PA prices will rise by about the same amount.
In Asia, PA spot prices rose in the week ended 14 September, because of firmer feedstock OX prices. Higher-priced deals were concluded in the week, as most producers continued raising their offers because of higher feedstock OX costs. However, demand in southeast Asia remained weak, as a number of buyers replenished their stocks in smaller quantities than their usual cargo volumes because of rising prices.
A few Chinese buyers were looking to buy cargoes in the import market, but most retreated to the sidelines when domestic prices fell.
European PA players settled September contract business at a higher level than for August after the feedstock OX contract for the month was finalised.
PA was first made through the oxidation of naphthalene in concentrated sulphuric 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 needs. In the US, all production of PA is from OX feedstock.
The process technology has changed little, though 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, allowing energy savings and reduced capital costs.
Sources said there are no PA plant expansions planned in the US anytime soon, and prices are projected to continue to follow feedstock OX contract prices.
No manufacturing fee increases have been announced in September or for the subsequent months.
In Asia, market participants expect demand from Chinese buyers to slow down as China's National Day holiday in October draws nearer.
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