19 April 2013 09:18 [Source: ICB]
The primary outlet for monopropylene glycol (MPG) is in unsaturated polyester resins (UPRs), used in surface coatings and glass fibre-reinforced resins. The second largest consumer is in functional fluids such as de-icers and antifreeze.
MPG is also used in plasticisers and hydraulic brake fluids. Other uses are in non-ionic detergents and as a humectant in the pharmaceutical, cosmetics, animal foodstuffs and tobacco industries. MPG is also an excellent solvent and extractant.
The European monopropylene glycol industrial grade (MPGI) market is structurally balanced to long as a result of economically subdued demand from the main downstream sectors such as UPRs and because of MPG capacity additions in Europe.
This mainly includes Dow Chemical's two-part expansion programme in 2010 and 2012 at its facility in Stade, Germany, and Oleon's new bio-based MPG unit at Ertvelde, Belgium, in 2012.
Oleon, however, stopped producing bio-based MPG between November 2012 and the start of 2013 because it was more attractive to sell feedstock glycerine than to further convert it to MPG.
General MPG run rates for synthetic product are estimated to be at around 80% in Europe as producers attempt to keep supply better aligned to demand.
Some market sources mention that MPG operating rates in Europe are also being determined by economic returns when compared with other upstream propylene oxide (PO) derivatives.
MPG sellers have lamented profitability over the last few years and this has meant MPG run rates have been kept trimmed and other PO derivatives prioritised as a result.
MPG demand is generally seasonally driven by aircraft de-icers and antifreeze during the winter and by the UPR sector during the spring and summer.
MPGI prices in early April have been assessed at €1,200-1,250/tonne FD (free delivered) NWE (northwest Europe) and are around €100-110/tonne below the price levels seen one year ago, although upstream propylene costs are lower in April 2013 when compared with April 2012.
During 2012, MPG producers struggled to recoup feedstock increases and also had to contend with downward pressure on MPG - which resulted in little to no difference in feedstock propylene and MPG price levels on some occasions.
This was caused by lacklustre demand for MPG, strong competition and good supply. In the first few months of 2013, however, MPG prices edged up - driven by some addditional de-icer demand - but have been relatively stable during March and softened slightly into April as a result of upstream cost relief and weak demand.
MPG is produced by the hydration of PO and the reaction also produces dipropylene glycol (DPG), tripropylene glycols and small quantities of higher glycols.
MPG US pharmaceutical grade is the same molecule as MPGI but has stricter handling and transportation requirements.
MPGI demand is expected to remain largely in line with GDP over the next few years in northwest Europe because of the maturity of the market and if the fragile economic climate continues.
There is, however, some regional variation in demand within Europe, with offtake in the Mediterranean expected to remain soft because it has been most affected by the poor macroeconomic conditions.
DPG is, however, identified as having more growth potential than MPGI in Europe, because of its uses in downstream flavours and fragrances and in the polyurethanes and plasticiser sectors.
DPG is also likely to become structurally short as a result of growing demand and its limited yield as a by-product in MPG manufacturing. In addition, the new bio-based routes for MPG cannot produce DPG.
No new expansion plans are thought to be on the cards at present in Europe, although outside the region there is the Sadara project, which is a joint venture between Dow and Saudi Aramco.
This complex in Saudi Arabia is due to start up in the second half of 2015 and produce various upstream and downstream chemicals including MPG.
European MPG sellers said they remain unconcerned by this new capacity - expecting that material will either be used in the Middle East or exported to Asia, rather than finding its way to Europe.
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