Chemical profile: Europe IPA

USES

Isopropanol (IPA) is mainly used as a low-cost solvent for industrial and consumer purposes. The most important downstream industries for the product include de-icers, paints and resins, pharmaceuticals, foods, inks, thinners for wood finishing and adhesives. Cosmetics and personal care products are also created using the cosmetic grade of IPA.

In addition, IPA is used in motor oils, as a solvent for oils and gums, to manufacture fishmeal concentrates, as a cleaning and drying agent in the creation of electronic parts and metals, and as a coupling agent and preservative. It is also used in the manufacture of acetone and methyl isobutyl ketone (MIBK).

IPA’s use as a raw material for acetone production is declining as acetone production as a by-product in phenol production has increased.

SUPPLY/DEMAND

The European IPA market has varied between balanced and balanced-to-tight since early in 2016 due to availability limitations at major European producers.

Sources say that Shell has had less that its normal allocation of material in Europe from the beginning of the year because of a force majeure on IPA at one of its plants in Singapore. Shell does not comment on its production.

In addition, INEOS carried out a planned shutdown at its German plant at Herne in the second half of April although the impact was mitigated by the producer building stocks in advance of the maintenance. Other producers were also heard to have availability issues in Q2, but this could not be fully confirmed.

The market tightened further from May onwards, which contributed to steep price rises in May and June.

Sources also said there were delays in delivering product as a result of the nationwide strikes in France.

Demand levels have been healthy since the beginning of 2016 with order book volumes generally seen as being the same or higher than the previous year.

PRICES

In Q1 2016, IPA prices trended downwards in line with falling feedstock propylene and crude oil levels, although slight tightness in the market due to limited availability from some producers prevented the full decrease from being passed on to IPA.

IPA prices have trended upwards in Q2 2016 as a result of a tighter market combined with rising feedstock levels, with average spot prices rising by a total of €200/tonne for technical grade between early April and late June.

In general, the spot price trend has allowed for margin improvements for European producers, which have partially counteracted the margin lost in the second half of 2015.

TECHNOLOGY

There are two main routes to producing IPA commercially. One method is based on the indirect hydration of refinery-grade propylene, which uses sulphuric acid to form isopropyl sulphate. This is then hydrolysed with steam to form sulphuric acid and IPA. The crude IPA is distilled to the desired purity.

Another route is the direct hydration of chemical grade (90+%) propylene, which avoids the need for sulphuric acid.

France’s Novapex uses a method of producing IPA involving the hydrogenation of acetone, which has similar cost effectiveness.

OUTLOOK

The recent UK vote to exit the EU (Brexit) is seen as a concern by some players due to the likely impact on euro/US dollar and euro/UK pound exchange rates, as well as the UK economy. Brexit is also expected to reduce investment in the UK by European companies, and could have a long-term impact on the stability of the EU as a whole. But no immediate physical impact is expected on supply/demand in the continental distribution market, although the longer term effects are more uncertain.

The feedstock price direction is seen as uncertain on volatility in crude oil prices, which will also be rocked by the Brexit decision. Crude oil remains oversupplied globally.

Seasonal demand for IPA is expected to be quite strong in the summer months due to increased usage in the downstream construction industry. There is no new capacity expansion planned in Europe in the immediate future, with the European market regarded as very mature.