OUTLOOK `13: US solvents demand to improve later in the year

04 January 2013 21:30  [Source: ICIS news]

HOUSTON (ICIS)--US solvents producers will be aided by snug supply in some markets, but after a slow start, demand is expected to pick up after the first half of 2013, sources said.

In the US isopropanol (IPA) market, year-end supply constraints were easing, but sources said material will continue to be snug well into the first quarter of 2013, stemming from operational and transportation issues that began late in the third quarter.

Similar conditions will continue to exist in the US methyl isobutyl ketone (MIBK) market, which also will contend with limited supply from domestic sources, and some pricing designed to discourage sales from product-limited producers.

The supply strains in those markets prompted sales controls through the end of 2012, with some sources suggesting that supply limits may continue in the first quarter.

Though US methyl ethyl ketone (MEK) supply and demand was steady, a series of unplanned cracker outages threaten to exert upward feedstock-related price pressure on the market as 2013 gets under way, sources said.

Talk of some consolidation in the IPA market surfaced late in the year but was not confirmed, and an MIBK buyer said that market continued to see supply constraints.

“Celanese vacated storing material in the US,” an MIBK buyer said, “so that has created tightness for us … They used to be our largest supplier. I think the current supply situation will linger until well into first quarter.”

While supply will be a factor, two US solvents producers have differing outlooks on the immediate future, but both see reason for optimism about 2013.

Eastman Chemical’s chief marketing officer Mark Costa said in mid-December that the company’s ability to replace acrylic and clearcoats for automotive paint was a huge opportunity.

“We can lower the VOC emissions relative to acrylic, and we can lower the applied cost because polyester is a more affordable product than acrylic, and so a great opportunity to grow is in there as well,” Costa said.

Costa added that solvents had been a key contributor to the company’s earnings growth last year, aided by the shale gas advantage in the US.

“North America’s a great business, and there are not a lot of people adding capacity here like they do in Asia chasing that growth,” Costa said.

For contrast, Celanese’s chief executive Mark Rohr said his goal of double-digit profits could begin in 2013, but it will require continued navigation of uncertain economies, both in the US and abroad.

“We see overall end-market demand for our products flat early in the year before starting to strengthen in the second half,” Rohr said in an earnings call in late October. The Celanese projects included the company’s ethanol startup in Nanjing.

US IPA suppliers include Shell, Dow Chemical, Exxon, Sasol, Haltermann and LyondellBasell.

US MEK suppliers include Shell, Exxon and Sasol; and US MIBK suppliers include Sasol, Haltermann, Celanese and Dow Chemical

Major US butac producers include Dow Chemical, Eastman and Oxea Group.

Major US etac producers include Celanese and Eastman.

($1 = €0.??)

Additional reporting by Lane Kelley

For more on the solvents above, visit the ICIS Plants & Projects database

By: Larry Terry
1 713 525 2653

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