OUTLOOK ’15: US oxos, plasticizers seek price floor in new year

HOUSTON (ICIS)–Players in the US oxo-alcohols and downstream plasticizer markets head into 2015 amid falling prices that are expected to spur demand in the first quarter.

Oxo-alcohol prices in the US stayed elevated compared to the rest of the globe for much of the year but tumbled downhill starting in November as price decreases in feedstock propylene as well as the global fall in crude oil prices weighed heavily on the market.

Spot prices for 2-ethylhexanol (2-EH) led the charge downward, falling as much as 25% and reaching the mid-70 cents/lb range by the end of December amid talk that one producer had flooded the market with a great deal of product.

N-butanol (NBA) and isobutanol (IBA) had their own freefall, each falling just less than 20% in the last two months of the year.

In the midst of the oxo-alcohol price fall, producers have kept utilisation rates high to get rid of high-cost feedstock and eventually take advantage of the current lower-cost feedstock heading into 2015. Producers believe that the lower prices in the marketplace coupled with the expected seasonal uptick in demand in the spring and summer will begin to put a floor on oxo-alcohol pricing by late winter and push prices upward soon after.

How high those prices go will be dependent on when propylene prices rebound and if demand from sectors such as housing and construction really takes off. The US housing and construction market has rebounded somewhat from the Great Recession of 2008-09 but could be poised to truly break out in the coming months amid projections of 3% or higher GDP growth in 2015.

That acceleration in economic growth would be a boon as well for plasticizers, most of which are used in polyvinyl chloride (PVC) applications that are heavily used in housing and construction.

US plasticizer prices were caught up in the overall price fall for petrochemicals at the end of 2014 amid ample supply in the market. While buying demand heading into 2015 was deemed good, many buyers opted late in 2014 to wait until the new year to see how low plasticizer prices would fall before making purchases.

Like upstream oxo-alcohols, market players expect demand to pick up early in the year, which could aid in finding a floor for prices before marching upward heading into spring and summer.