22 October 2012 16:36 [Source: ICIS news]
By Matt Tudball
LONDON (ICIS)--Demand in the European isopropanol (IPA), methyl ethyl ketone (MEK) and methyl isobutyl ketone (MIBK) markets is likely to be subdued for the rest of October because of ongoing poor macroeconomic conditions.
Ample stocks and a general lack of end-use market purchasing confidence has seen demand drop off from the post-summer holiday restocking period in September, and remain subdued for most of this month.
Volatile feedstock costs across all three solvents have contributed to a ‘wait and see’ purchasing sentiment. Buyers are reluctant to purchase large amounts of stock at higher prices, fearing raw material costs might fall in November.
Demand for Technical grade IPA has been minimal in recent weeks because seasonal demand for products such as screen wash and anti-bacterial wipes has not yet taken off. Warmer weather across most of Europe has been largely to blame, sources said.
“Once/if the weather turns, [technical grade IPA buyers] will start buying because they will be scared of running out of stock” a distributor said.
Distributors and consumers are keeping stocks low, only taking what product is needed to keep their production lines running. This hand-to-mouth attitude towards buying Has seen distributors struggle to attract customers in the face of stiff competition for volumes.
“There is very little discussion in the spot market. It’s a buyers market, €5/tonne can be the difference [between a sale]” a second distributor said.
There is some relief in the market, however. IPA’s versatility means it does not have to rely on one specific market sector to drive demand. Cosmetic and pharmaceutical grade IPA remains relatively strong in its use in detergents – a more resilient market in times of economic downturns.
With winter approaching, there is still room for anti-bacterial and vitamin-based products to show increased demand, and producers and distributors agree there is still plenty of time for cold weather to play its part in the screen wash markets.
Participants in the European MEK and MIBK markets will not be hoping for colder climates to spur demand, however.
Used extensively in the paints and coatings industries and closely tied with construction and automotive output, MEK and MIBK demand has fallen from the third quarter and remains quiet.
“[MEK] Demand isn’t dropping off a cliff,” a producer said, but added that it has been relatively poor for the whole year. The construction industry in southern and western Europe has already felt the impact of the eurozone crisis, and will slow further as the colder winter months set in.
MIBK is likely to remain a very quiet market for the rest of the fourth quarter, facing not only a drop in demand from its use in paints and coatings, but also from a drop in automotive construction, where MIBK is used in the production of car tyres.
European new car registration has fallen for the 12th consecutive month, with demand for new passenger car registration in the EU down 7.6% since January, according to figures published by the European Automobile Manufacturers’ Association on 16 October.
The lack of demand for MEK was highlighted late last month when Sasol, one of three MEK producers in Europe, declared force majeure on its 65,000 tonne/year plant in Moers, Germany, from 24 September to 3 October.
During the outage, MEK prices rose by only €10/tonne ($13/tonne) because of pre-emptive buying, but have since fallen to below pre-outage levels. Mid-September MEK prices were €1,350-1,370/tonne FD (free delivered) NWE (northwest Europe). Following the outage, prices have fallen to €1,340-1,360/tonne.
Rather than panic-buying, most consumers were able to wait for Sasol to lift the force majeure because buying interest from end-use sectors was minimal. What limited demand there was, was comfortably met by distributor inventories and the remaining two suppliers.
Distributors and buyers agree demand is unlikely to pick up for the remainder of 2012 because of the poor economic conditions in Europe and plentiful supply.
“Product is available, I would even consider… our demand on the slow side - not really a surprise, the end of the year [is] coming” an MEK buyer said.
Demand from the majority of end-use markets is likely remain quiet for the rest of 2012. Producers will soon look to reduce inventories and distributors will try to sell stock before year-end.
A drop in temperature may spur on some demand for IPA grades later in the year, but for now, market participants are working on a week-by-week basis until some economic certainty re-enters the sector.
($1 = €0.77)
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