Hydroquinone Prices Recover After Period of Oversupply

12 October 1998 00:00  [Source: ICB Americas]

By Feliza Mirasol

Prices for hydroquinone are increasing for the first time in three years as the market tightens and growth continues at a steady pace. US producers say supply and demand are more balanced than they were last year, and the industry is moving prices back to previous levels to keep the business healthy.

Rhodia Inc., a wholly owned subsidiary of RhÖne-Poulenc SA and one of the major hydroquinone producers in the US, has raised global prices for all grades of its hydroquinone products by 12 percent.

The softness in pricing was due, in part, to Rhodia's expansion in 1995, which added significant capacity to the market, according to John Pannucci, director of Rhodia's North American business unit for diphenols and aromas.

"The capacity we added did contribute to some price softness, but we find now that our volumes are very strong on a worldwide basis. We are trying to return to previous price levels to recoup the investments we made in process improvements, environmental safety and capacity additions during the past three years as they were needed to follow market demand," Mr. Pannucci says.

Rhodia is not undertaking additional expansions, having recently completed a series of debottleneckings begun in 1995 at its hydroquinone and hydroquinone derivatives plants in Baton Rouge, La., and St. Fons, France.

"Rhodia is unique in that it has two manufacturing facilities," says Mr. Pannucci. The company reports strong sales despite the added capacity.

"While we have the ability to increase our hydroquinone capacity further, we don't see that [new] capacity is needed. We believe there is enough capacity available in the world [market] today by all of the suppliers to satisfy [current global] demand, and possibly for the next two years," Mr. Pannucci notes.

Rhodia operates on a global basis and offers more than 80 percent of its hydroquinone products on the merchant market.

In July, Eastman Chemical Company, another leading US producer of hydroquinone, raised its off-list prices for photographic-grade hydroquinone by 10 cents per kilogram for domestic sales and 15 cents per kilogram for international sales (CMR, 6/15/98, pg. 16).

Like Rhodia, Eastman sees no reason to raise capacity despite the market's tightening.

"We have not undergone expansion and have no current plans to increase capacity," says Jeff Presley, Eastman's business market manager for organic intermediates.

"The current level of global supply matches the level of consumption. We currently have 25 million pounds of dedicated capacity to produce photographic-grade and USP-grade hydroquinone, which are the highest quality-grades of hydroquin-one in the marketplace." Eastman's hydroquinone plant is in Kingsport, Tenn.

Growth in the hydroquinone market is steady, producers say. According to Menlo Park, Calif.-based SRI Consulting, overall US consumption should grow at an average annual rate of 3 to 5 percent to the year 2000. Based on this, total US consumption will exceed 44 million pounds by the end of the year, up from 41 million pounds in 1995.

The primary applications for hydroquinone are rubber antioxidants, intermediates, photographic processing and polymerization inhibitors. Both Rhodia and Eastman cite polymerization inhibitors as the strongest market for hydroquinone at a 3 to 4 percent annual growth rate.

Eastman is seeing a decrease in this segment's growth rate because of the Asian crisis, but the company says that, as a whole, it is not seeing a "large impact" from that crisis.

Photographic processing chemicals are also a substantial end market for hydroquinone, which is used as a developing agent in silver halide photography.

Fairfield, N.J.-based consultant Kline & Co. estimates the overall US market for silver halide films, papers and photofinishing formulations at slightly more than $1 billion in 1997, excluding film and resin coatings. Photofinishing formulations, including hydroquinone and a variety of other chemicals, account for nearly $400 million of that total.

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