Europe Q2 oxo-alcohols demand strength remains unclear

LONDON (ICIS)–The oxo-alcohols market is entering into what is traditionally its strongest demand period and while there is quiet optimism that this will develop there are also potentially opposing forces.

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– Feedstock costs put pressure on pricing

– Demand could strengthen for Q2

– Ample oxo-alcohols supply

Some support is expected to be seen from upstream feedstock costs but demand also needs to improve in order to support the market.

Supply is plentiful for nbutanol (NBA), isobutanol (IBA) and 2-ethyl hexanol (2-EH) and there are no planned turnarounds expected to impact supply as the heavy round of work took place in 2018.

BASF lifted its force majeure declaration on IBA on 19 March, but even up until that point, supply was said to be more than sufficient to cover demand in the first few months of the year.

When sources look up the chain they are not concerned about any supply restrictions of feedstock propylene as was initially the case for some for Q2.

It is generally felt that oxo-alcohols producers have had time to prepare ahead of the two largest cracker plants going into planned maintenance in April/May from Shell and BASF.

There was a spate of unplanned cracker trips around the middle of March, but the spot market was already seeing some considerable length and product remains on the long side.

The increased propylene supply has been a result of softer-than-expected demand from the likes of oxo-alcohols, some unplanned downstream outages from markets such acrylonitrile, regular imports of propylene and the fact that all players had prepared ahead of the maintenance period.

The accumulation of these events and the as-yet unknown contract price for April propylene lends to further uncertainty in the market.

“In general, the trend is that 2-EH seems to be getting longer and [spot March] prices are affected with slight decreases,” one seller commented, but added that “we are getting closer to April and can see what happens to propylene soon.”

Demand wise there is some quiet optimism that buying patterns can strengthen in the traditionally stronger Q2 period.

“Q1 business has been soft in general which follows on from a soft Q4, but it is starting to pick up and it is looking like Q2 should be better,” one NBA buyer said.

For 2-EH there has been some additional export opportunities to help balance the market in Q1 and with SIBUR now officially started its dioctyl terephthalate (DOTP) production in Perm, Russia, which will result in less 2-EH material arriving from Russia to NWE.

“Q2 – we can rely on that period due to the seasonal demand – not sure people hope for much more – the morale has been rather pessimistic and we all know it is not 2016-2017,” a producer said.

“Let’s see how Q2 performs, if it does not pick up, then you can pretty much write-off the year,” a re-seller said.

Spot prices for NBA, IBA and 2-EH have chipped away on the spot market due to plentiful supply against poor demand, but contract prices related to feedstock formulas have seen an increase.

However, producers are starting to feel the pinch and state that margins are being eroded on the spot market and hope that demand can develop sufficiently in Q2 to support the market in getting some firmer prices through.

Downstream, some markets are said to be showing signs of recovery, though there are also downstream outages to contend with such as the acrylate esters outage from BASF scheduled for March/April.

There is so much global uncertainty at present that many players are pulled in different directions  as they attempt to manoeuvre through some very challenging business conditions.

NBA is a solvent with more than half if its production used as an intermediate chemical in the production of butyl acrylates for paints, coatings and adhesives, or acetates and glycol ethers. 2-EH is used to make plasticizers. Key end markets include the construction, appliance and automotive industries.

Focus article by Jane Massingham