OUTLOOK ’19: Europe IPA, MEK, MIBK likely to be less volatile in 2019

LONDON (ICIS)–European solvent markets – isopropanol (IPA), methyl ethyl ketone (MEK) and methyl isobutyl ketone (MIBK) – are likely to be more stable in 2019 than in the last couple of years.

All three markets had a fairly volatile couple of years after significant tightness and sharp hikes in 2017 that were followed by a lengthy downward trend as the markets have been readjusting.

Prices in the solvents markets reached very high levels in 2017 as a result of production problems at Shell Chemicals’ site at Moerdijk in the Netherlands.

Shell is one of the major European producers for all three products. It has 50% of the region’s nameplate MIBK capacity, more than 25% of the MEK capacity and around a third of that for IPA.

The markets gradually readjusted in the first half of 2018. MEK and MIBK reached higher levels in 2017 and therefore took longer to re-balance after.

All the three markets are set to enter 2019 at price levels corresponding to current fundamentals, which will in turn limit volatility at the beginning of the year.

As the products are now better balanced, they are also more likely to respond to upstream price adjustments than in 2018.

This is the case particularly for the IPA market, which tends to move in line with feedstock propylene when the market is well balanced.

Supply of propylene and in turn IPA is also set to be smoother at the start of 2019, as the levels on the river Rhine improved following historic lows in 2018.

There is still some length in the MEK and MIBK markets, which may exert further downward pressure on them in 2019. This will depend to an extent on the volumes of Asian material to come to Europe in the year.

Both MEK and MIBK tend to be pressured by competitively-priced imports when the arbitrage gap with Asia is open.

Focus article by Yana Palagacheva