OUTLOOK ’13: Mideast solvents overshadowed by global economy

27 December 2012 07:44  [Source: ICIS news]

By Veena Pathare

SINGAPORE (ICIS)--The Middle East solvents market is expected to witness a period of watchfulness and caution as a result of greater impact of the global economic slowdown on the region’s solvent trade.

In the Middle East markets, much of 2013 is expected to be overshadowed by the global economic issues.

The Eurozone crisis is said to have a greater impact on the Middle East, more than any other region because of the sheer proximity to Europe, according to market sources, although direct solvent inflow from Europe is not significant.

The region’s demand for three key solvents, IPA, acetone and ethyl acetate (etac) is not expected to change in a big way in volume terms from the present level of 77,000 tonnes/year, according to solvent importers and distributors in the region.

In the Middle East, IPA has a total demand of about 35,000 tonnes/year, while acetone and etac requirements add up to 18,000 tonnes/year and 24,000 tonnes/year respectively.

These products find application in the downstream coatings, flexible packaging and industrial inks markets.

The uncertainty in downstream user markets in the Middle East is said to be fuelled by the global markets’ sentiment.

The eurozone crisis, lower-than-expected growth in China and India and a continued fiscal consolidation with weak financial balance sheets in the US weigh heavily on the market sentiments for solvents, according to market participants.

Although regional demand for solvents is expected to remain steady from 2012, traders and buyers are likely to adopt a largely defensive strategy.

Traders aim to hold lean stocks and replenish them regularly, rather than risk carrying higher volumes.

“One cannot take the risk of carrying higher stock levels of product that could well go unsold in these uncertain times”, said a United Arab Emirates (UAE)-based trader.

The Middle East’s solvent requirements are met by a mix of regional production supported by imports from South Africa, China, Taiwan, South Korea, Singapore and India.

Although the Middle East is not likely to see any local addition in production for IPA and acetone, newer capacities in northeast Asia are expected to impact supply of imports to the region.

An excess supply situation is therefore anticipated, given a slow downstream offtake of product.

The etac market in the Middle East is expected to have a dynamic shift with the start-up of Saudi International Petrochemical’s (Sipchem) 100,000 tonne/year etac/butyl acetate (butac) plant at Jubail in Saudi Arabia in the second quarter of 2013.

According to market sources, the plant is expected to fulfil the region’s total demand of 26,000 tonnes of etac in addition to meeting a considerable international requirement.

“Asian [etac] producers who have invested in the region could lose out on sales with Sipchem’s start of operations, needless to say, our business too,” said a UAE-based trader who imports etac into the Middle East.

This could well be deemed an end to etac imports into the region.

The region which presently sources bulk of its etac cargoes from China and India could see a price war among the Asian exporters whose export volumes are likely to take a hit when Sipchem starts up its plant in the second quarter of 2013.

Asia IPA prices were slightly up by $10/tonne (€7.60/tonne) to $1,320-1,370/tonne CFR (cost & freight) NE (northeast) Asia on 21 December from a week ago, according to ICIS.

Asia Etac prices were slightly down by $5/tonne to $910-955/tonne CFR NE Asia on 21 December from a week ago while acetone was up by $25/tonne on the lower end and up by $10/tonne on the higher end to $1,135-1,145/tonne China Main Port during the same period.

($1 = €0.76)

By: Veena Pathare
+65 6780 4327

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