US fatty alcohols supply and demand expected to find balance in H2
Lucas Hall
21-Jul-2020
HOUSTON (ICIS)–The US fatty alcohols market is expected to find more balance in H2 as demand eases, delayed imports arrive and producers take summer and fall maintenance.
Q3 demand is easing following Q2 stockpiling and panic buying amid the onset of the coronavirus pandemic.
Consumers stockpiled on essential goods like cleaners and disinfectants amid the onset of the pandemic, clearing store shelves and prompting supply chain shortages.
Many manufacturers, particularly large ethoxylates and other surfactants producers, increased their Q2 contract volumes to account for increased demand across the cleaning sector and supply chain disruptions caused by the pandemic.
Supply chain disruptions in Asia, and to a lesser degree Europe, caused many Q2 volumes to be delayed into Q3, prompting some buyers to dip into the spot market to cover their positions.
The Q2 surge in demand was short-lived, however, as supply chain constraints eased, as US lockdowns and other coronavirus-related movement restrictions were lifted and as consumers returned to relatively more normal purchasing habits.
Seasonal demand is typically slower in H2, tracking the Q3 summer vacation season followed by the Q4 destocking season.
As manufacturers and consumers alike had largely stockpiled on essential goods amid the onset of the pandemic, they are less likely to need them in such high volume during the slower summer and fall months.
As such, many manufacturers took on less contractual volumes for Q3 as they await their Q2 volumes to arrive over the next couple months.
At the same time, a number of oleochemicals producers operating in Asia and Europe are expected to take turnarounds and other maintenance over H2, reducing production in the coming months and helping to rebalance supply.
One exception to this dynamic is synthetic alcohols, which are expected to loosen now that Sasol has achieved commercial operations at its US Lake Charles, Louisiana, alcohols expansions as of June.
The potential for further supply chain disruptions amid the continued spread of the virus, particularly across parts of the US and Latin America, remains a significant concern, although at present the so-called “second-wave” of the virus is not expected to prompt as severe of disruptions.
As supply and demand rebalance, feedstock costs are likely to once again become the main driver behind US fatty alcohols negotiations.
H2 feedstock costs across the oil palm complex will depend on the dynamic between the annual palm harvest and the recovery of southeast Asia’s biodiesel and oleochemicals industry.
Some expect the annual palm harvest to put downward pressure on the market amid weaker year on year edible oils demand and a slower than expected recovery across southeast Asia’s biodiesel industry.
Others expect recovering economic activity to put upward pressure on the market, especially as oleochemicals producers take maintenance over the next several months.
The US is a major net-importer of natural fatty alcohols and a key production region for synthetic alcohols.
The key end-use for mid-cut alcohols is surfactants. This class of chemical products comprise numerous cleaning and detergent uses, ranging from household agents to oilfield applications.
Focus article by Lucas Hall
Thumbnail image shows hand sanitizer. Photo by Shutterstock
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