OUTLOOK ’19: US acrylates market facing a soft start to an uncertain year

HOUSTON (ICIS)–Conventional wisdom in the US acrylates market would point toward resurgent fundamentals in the first half of 2019, but economic and supply-chain uncertainties make the near-term picture difficult to paint.

“Right now the key word is ‘uncertainty,’” a producer said. “And as you know, every day brings more news from Washington that makes it very difficult to forecast.  If I had answers to your questions I probably would be working on Wall Street, not in chemicals.”

At the very end of 2018, demand and pricing were dropping off steeply, but the market appeared to be broadly softening beyond what could be solely attributed to sharply weaker November propylene and downward pressure on December propylene,  the latter of which will not bode well for January acrylates pricing.

“Propylene is obviously dragging prices down, but there appears to be an overall softening in the market,” a buyer said. “The producers are trying to deny it, but we are seeing US producers from whom we do not purchase trying to incentivise us to pull volume from them.

“Also we are starting to see signs that the US-China tariffs are starting to disrupt trade flow,” the buyer added. “Regions we have not typically seen as interested to supply are now reaching out to gauge our interest.  I can only assume this is due to material flowing from China into their region.”

Heightened demand next spring – some of it pent-up, stemming from wildfires in California and several hurricanes in 2018 – is likely, especially with expectations of a mild winter.

The National Oceanic and Atmospheric Administration’s (NOAA) Climate-Prediction Center has forecast above-average winter temperatures through February across the northern and western US, Alaska and Hawaii.

While intermediates such as acrylic acid and oxo-alcohols should see buying interest escalate from the architectural coatings markets, as well as from adhesives used in construction, volume-growth projections for 2019 from a couple of paint and coatings makers are moderate.

Word that Brazilian producer Unigel is considering establishing an acrylics plant in the US was a surprise to domestic buyers and sellers alike, but the idea is still being evaluated on its technical and profitability merits, the company confirmed.

For the foreseeable future, domestic petrochemical markets will continue to experience transportation constraints as trucking shortages strain raw material and finished-product deliveries.

A buyer said he does not expect that to affect demand significantly, but added that “companies are mostly just adjusting to the new state of the industry.”

Acrylates are commonly used to make products including paint and coatings, plastics and construction and pressure-sensitive adhesives.

US acrylates suppliers include Arkema, BASF, Dow Chemical and Sasol.

Focus article by Larry Terry

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