SE Asia IPA, MEK demand fails to improve amid gloomy outlook

Focus article by Angeline Soh

SINGAPORE (ICIS)–Southeast Asia’s demand for isopropanol (IPA) and methyl ethyl ketone (MEK) has failed to improve in November amid a gloomy market outlook following plunges in upstream crude, naphtha and acetone prices, market sources said on Wednesday.

Demand is typically strong for IPA and MEK in November and December as the region anticipates a pick-up in export orders for end-products in the new year.

On 21 November, MEK prices were assessed at $1,420-1,450/tonne CFR (cost and freiefht) SE (southeast) Asia, down by $40-50/tonne from the previous week, while IPA fell by $10/tonne over the same period to $1,270-1,290/tonne CFR SE Asia, according to ICIS data.

MEK and IPA are solvents mainly used for industrial paints and coatings, printing inks and in finished goods, such as furniture and cars.

IPA also has applications in cosmetics and pharmaceuticals, and is used as a cleaning solvent in electronics manufacturing.

At midday, US crude for January delivery was largely flat at $74.12/bbl, while naphtha was down by $3.50-4.50/tonne from the previous day at $663.00-666.00/tonne CFR (cost and freight) Japan.

Crude prices have tumbled by as much as 30% from their peak in June on concerns over weakening global demand in an oversupplied market.

Acetone prices have also been falling. On 21 November, spot acetone prices in southeast Asia were assessed at an average of $1,025/tonne on 21 November, down by $20/tonne from the previous week, according to ICIS data.

“It’s the first time in five years that the demand [for IPA and MEK] did not peak in Vietnam,” said a Thailand-based trader who facilitates trade flows to and from Vietnam.

Vietnam’s demand for solvents usually reaches peak period from November to December, when production for exports – particularly to its major market China – goes in full swing.

In Indonesia, demand is being curbed further because of labour strikes that erupted following a decision by its new government to hike domestic prices of gasoline and diesel to cut its fuel subsidy.

Subsidised fuel prices were raised by 30%, resulting in at least a 20% decline in the purchasing power of Indonesians, local traders said.

The resulting widespread labour strikes gripping Indonesia have disrupted production, causing players in the IPA and MEK markets wary of entering into spot discussions, a trader said.

In Malaysia, market players are also wary of a possible social unrest as its government had adjusted up domestic fuel prices on 2 October, a move that surprised many, market players said.

“Now that the November peak is gone, we don’t know if the January pick-up in demand before the Lunar New Year in February will manifest,” said a China-based trader.

The Lunar New Year falls on 19 February 2015.

Market players have adopted a wait-and-see mode on the IPA and MEK markets.

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections