After tight supply and surging prices in H1, US IPA supply to be more ample in H2

HOUSTON (ICIS)–Following dramatic price increases for isopropanol (IPA) in H1 due to supply shocks and shortages for several weeks, supply is expected to be ample for H2 due to increased domestic production as well as a consistent stream of imports from Asia.

Supply is also projected to lengthen because few producers have scheduled turnarounds in the second half of the year.

Demand is expected to continue to slow from the peaks seen in the spring, even as coronavirus cases continue to grow in parts of the country that were spared by the initial wave.

H1 Overview

IPA prices dramatically increased in late March and in April because of the product’s role in the production of hand sanitizer, a previously niche market that grew in importance due to the spread of the coronavirus.

While most petrochemical prices fell due to lower demand when lockdowns began, IPA demand surged.  In some instances, prices quadrupled in less than a month.

Since then, prices have steadily come down as demand stabilised but remain higher than before the pandemic.

Eventually, supply increased as production ramped up throughout the quarter, as suppliers sought to fill a much larger volume of orders than traditionally seen for sanitizers and other sanitary products.

In addition to the increase in domestic production, imports from China, South Korea, and Taiwan also arrived by May, once those countries reopened their economies and resumed production, which further increased supply.

Due to these supply drivers, prices have come down, especially as demand levels stabilised.  There has yet to be a second spike in prices following an increase in coronavirus cases and hospitalisations beginning in mid-June.

Supply Outlook

IPA supply is expected to stay above traditional levels throughout Q3.  Asian imports have been steady  since the containment of coronavirus cases in the springtime and will continue to arrive in the US since European demand is curtailed.

Domestic production is also expected to stay high, and market participants have not observed  recent production issues.

Many sales controls were removed entirely in the past several weeks.  In H1, even some of the largest buyers were under sales controls.

Demand Outlook

Market participants expect H2 IPA demand for sanitizer to be up, year over year.  However, demand from other industries is expected to be down compared to H2 2019 numbers.

This transitionary phase led to price drops in mid-July.

Although there has not yet been a strong market response to the rise in coronavirus cases in Florida, Texas, Arizona and California that began at the end of Q2, market players are avoiding complacency because of the sudden price change seen in the middle of H1.

IPA is expected to see strong demand in the sanitary sector until coronavirus cases see a sustained decline.

Domestic IPA prices are assessed at 80-100 cents/lb ($1,764-2,205/tonne) DEL (delivered) US Gulf, and spot prices are assessed at 77-95 cents/lb free on board (FOB) US Gulf.

In export markets, prices are assessed at 72-78 cents/lb FOB US Gulf.

The chart below shows domestic, spot, and export IPA prices as of 30 July.

US IPA suppliers include ExxonMobil, Dow Chemical, LyondellBasell, Monument Chemical and Shell Chemical.

Visit the ICIS coronavirus topic page for analysis of the impact on chemical markets and links to latest news.

Focus article by Deniz Koray