MEK, IPA at all-time lows – for different reasons

Oversupply, mainly from Asian imports, has driven down prices for one solvent, while propylene’s dropping values have cut into the other solvent. (Image source: Port of Houston Authority)

HOUSTON (ICIS)–Falling values for US methyl ethyl ketone (MEK) and isopropanol (IPA) have the solvents at all-time lows, but for vastly different reasons.

MEK prices fell last week in what sources have said is an oversupplied market.

Sentiment has been mixed as to whether prices have reached a floor or could still fall further.

Those thinking values could fall even lower point to the main reason for the oversupply – competition from less expensive material being imported from Asia.

“It sounds like MEK is going to be a dog for a while,” a distributor source said recently. “There is still so much Asian product, leading to plenty of supply.”

MEK prices in Asia as assessed by ICIS are currently in the low 30s cents/lb, almost 20 cents/lb less than the US domestic price.

US government trade data showed a spike in MEK from China, Japan and Taiwan in 2015. Imports from the three Asian countries accounted for more than 20% of all imported material in 2015 after making up only 6% in 2014.

However, the latest trade data from the International Trade Commission (ITC) may indicate a change as there was dramatically less material imported from Asia through February.

Conversely, some sources have said that with MEK at this level, producers cannot go much lower and still be able to justify the sale and that many are getting close to break-even from a variable perspective.

Domestic product is at its lowest since ICIS began quoting the US MEK DEL (delivered) price on 15 May 2009, and the spot price is at its lowest since July 2009.

Meanwhile, the reason for IPA prices being at all-time lows has been attributed to cheaper upstream costs for propylene, which was recently at a low not seen since 2009.

However, after settling lower in January and February, March propylene contracts settled up 1.5 cents/lb on 11 March, and some IPA producers jumped at the chance to announce increases.

US producers Dow and Monument separately announced in March they will seek 3 cents/lb increases for IPA in April.

However, a distributor source said it didn’t think the hikes would take hold since producers Exxon and LyondellBasell did not announce increases.

The domestic IPA price is at its lowest since ICIS began quoting the US Gulf DEL (delivered) Consumer price in May 2009.

Spot IPA prices fell last week on ample supply, with the spot export price reaching its lowest since December 2003, and the spot tank truck price to its lowest in more than 10 years.

Market participants are continuing to watch US housing data for a possible uptick in demand. There is sentiment that a mild winter might lead to an earlier and stronger start to the spring coatings season.

MEK and IPA are used in paints and coatings and can sometimes see increased buying when construction picks up in warmer weather.

INSET PHOTO: ISO containers shipped from China. (BAO / imageBROKER/REX/Shutterstock)

SMALL PHOTO: Home construction and painting season could bring a rise in solvent values. (Image Source/REX/Shutterstock)