Price and market trends: Demand for eco-friendly plasticizers to grow on global recovery

11 January 2013 11:33  [Source: ICB]

Demand for traditional material such as dioctyl phthalate (DOP) could ease with the switch to eco-friendly plasticizers

 

Construction is among the end-markets for green plasticizer dioctyl terephthalate, also used in toys

Copyright: RexFeatures

Demand for eco-friendly plasticizers is poised to strengthen into 2013, tracking the recovery of the global macroeconomic environment and feedstock prices, industry sources say.

Global demand for plasticizers is expected to grow at an annual rate of 3.5%, with Asia taking the lead in consumption, an India-based producer said. Current global plasticizer demand is at around 6.5m tonnes, with Asia consuming about 3.5m tonnes or 54% of the total, he added.

ASIA ADOPTION
Asia's demand is projected to grow at a faster pace of 4-6%, the producer said.

The overall growth rate for plasticizers in the Chinese market is estimated to be at around 7% per annum, several industry sources say.

"With the switch to eco-friendly plasticizers, demand for traditional plasticizers like dioctyl phthalate (DOP) might ease in the coming years," a northeast Asia-based producer said.

Environmentally friendly plasticizers such as di-isononyl phthalate (DINP) and dipropyl heptyl phthalate (DPHP) demand is estimated to grow, along with the global economy and amid new environmental regulations, market players said.

In South Korea, users are expected to switch to environmentally friendly plasticizers in view of new regulations by the government in the flooring and wallpaper sectors, according to several industry sources familiar with the matter.

"Demand for DOP is likely to ease, and users are going to switch to dioctyl terephthalate (DOTP) or DINP," a South Korean seller said.

"However, price trends for DINP remain unclear as production costs are much higher than traditional plasticizers due to the lack of feedstock isononanol (INA), resulting in higher costs," another northeast Asia-based seller said.

COMPETITIVE PRICING
The likelihood of a switch to DOTP seems plausible, as it is a direct substitute for DOP and is more competitively priced than DINP, several market players said.

DINP and DOTP, as environmentally friendly plasticizers, will be widely used in the production of plastics, which will in turn reduce demand for traditional plasticizers, they added.

DOTP is a non-phthalate plasticizer that is widely used in products such as polyvinyl chloride (PVC), toys, childcare items, food contact materials and medical devices. End-markets include building and construction, health and wellness, as well as infant care.

China's estimated demand for DOP, DINP and DOTP in 2013 is expected to be at around 1.35m tonnes, 450,000 tonnes and 292,000 tonnes respectively.

"Demand for DOP from China will not drastically drop, as the switch will not happen overnight," a seller for feedstock 2-ethylhexanol (2-EH) said.

In addition, factoring all the new capacities for oxo alcohols, China will become more self-sufficient for plasticizer alcohol and that might result in cheaper feedstock 2-EH, a northeast Asia-based trader said.

"Makers in China might instead buy domestic 2-EH since there's an influx, in turn reducing production costs, and this might even make export feasible", a south Korean seller said. "The outlook does not look too bright on a demand-supply balance point of view," he added.

Margins in 2012 were squeezed and sellers will likely try to gain back such margins in the year 2013, but this largely depends on the global health of the economy, several buyers said.

 
UNCERTAIN MARKET
The price gap between DOTP and DINP in 2012 has narrowed to about $0-40/tonne on prevailing weak downstream demand on the back of an uncertain market.

However, the majority of market players are in agreement that the spread is expected to widen back to the "normal" gap of $50-100/tonne in 2013, depending on the whole global macroeconomic situation.

"We've got to take [the shift] one step at a time," a Taiwanese producer said.

A southeast Asia-based producer said: "There will certainly be a shake-up in the industry."

2-EH and phthalic anhydride (PA) are feedstocks for DOP, while PA and INA are feedstocks for DINP. Purified terephthalic acid (PTA) and 2-EH are used to make DOTP.


By: Samuel Wong



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