South Korea's ISU Chem cuts IPA production on negative margins

14 December 2012 08:58  [Source: ICIS news]

SINGAPORE (ICIS)--South Korea’s ISU Chemical has reduced the average operating rates of its two 30,000 tonne/year isopropanol (IPA) units in Ulsan to 50-60% capacity this week from 70-80% capacity previously, amid high feedstock acetone costs and weak regional demand, a source close to the company said on Friday.

The producer is opting to cut back on its exports in December and perhaps January as well because it has not been able to raise its prices to reflect the rising feedstock costs, the source said.

“Margins are negative for acetone-based IPA plants. Production cuts will become more widespread unless IPA prices can increase in January,” a trader said.

The spread between IPA and acetone prices has fallen below $200-250/tonne, the minimum required by IPA producers, according to Chinese sources.

Several acetone-based plants in China have either reduced or suspended IPA production as a result of weak margins, the sources said.

Suppliers who operate such facilities are hoping that the lower production will tighten supply and boost prices, but they are facing competition from producers who are using the lower-cost feedstock propylene.

“I can still get IPA cargoes for January loading at the same price as December supplies because the margins for propylene-based plants are still healthy,” a buyer in southeast Asia said.

By: Yeow Pei Lin

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