OUTLOOK ’19: Feedstock propylene to drive US MPG amid stable fundamentals

HOUSTON (ICIS)–The US monopropylene glycol (MPG) market is expected to be largely stable in 2019, with price direction likely to be driven by feedstock propylene.

MPG contracts are influenced by the delta of the previous month’s propylene contract price, and generally follow formula-based contract pricing.

US propylene supply is expected to expand in 2019. It remains to be seen whether propylene values will be weighed down by the growing supply or buoyed by slightly higher demand, which is expected.

MPG prices ended 2018 at the high for the year and have risen by just over 16% from the start of 2018.

No issues are anticipated to affect the production of propylene oxide (PO), which is used in the production of MPG.

Looking further ahead, LyondellBasell is building a propylene oxide/tertiary butyl alcohol (PO/TBA) project in Channelview, Texas, for start-up by 2021.

The spread between US MPG and PO has been improving recently. It is now at its highest of the year, as shown in the following graph.

PO producers in the US include Dow Chemical, Huntsman and LyondellBasell.

Availability of MPG was generally good throughout 2018, and is likely to remain so in 2019, not accounting for the impact of any unplanned outages.

Supply of dipropylene glycol (DPG), a byproduct of MPG production, is tight, and has been so for more than a year. It is expected to remain so in the near term.

Demand for MPG has been described as slightly above average through the fourth quarter of 2018, and could rise or fall depending on how severe winter is in the first part of 2019.

MPG is used in the winter as a de-icer for the aircraft industry, as well as in antifreeze.

Producers have seen increased buying in the de-icing sector since August, when buyers began procuring supply, likely because inventories were drawn down after an extended winter last year.

There is mixed sentiment on how cold winter temperatures will be this winter.

The US National Oceanic and Atmospheric Administration (NOAA) said in recently in an update to its 2018 Winter Outlook that a mild winter could be in store for much of the US.

NOAA also increased the chance of an El Nino forming to 90% on 13 December, although expectations are that it will be weak.

El Nino is an ocean-atmosphere climate interaction that is linked to periodic warming in sea surface temperatures in the central and eastern equatorial Pacific.

During the winter, typical El Nino conditions in the US can include wetter-than-average precipitation in the south and drier conditions in parts of the north.

Some forecasters are calling for colder-than-normal conditions from the midwest to the northeast, with the coldest temperatures expected in mid-February.

Major US MPG producers include Dow Chemical, Huntsman and LyondellBasell.

Focus article by Adam Yanelli and Tarun Raizada

ICIS US Outlook Seminar 2019

Register for your complimentary place at the ICIS Outlook Seminar on 30 January in Houston, Texas. Join our market experts as they cover the key developments, potential growth opportunities and future trends in the petrochemicals and polymer markets. Secure your place now.