Mexican PA could fill US supply gaps as demand rebounds in 2021

HOUSTON (ICIS)–As US run rates for phthalic anhydride (PA) are projected to remain around 90% – leaving little room for additional production – Mexican imports could well meet increased demand in 2021.

US PA consumption into plasticizers and unsaturated polyester resins (UPR) is expected to rise in 2021, according to ICIS projections.

US buyers have recently seen aggressive offers from a Mexican producer. The producer also is able to ship molten PA via rail, whereas most imported material is in flake form for easier logistics.

Molten material appeals to a wider spectrum of buyers than flake, as not all buyers own smelters. Koppers is the only US producer of both flake and molten PA.

The Mexican product is said to be of comparable quality to domestic product, but as most US buyers are committed to contracts with longtime domestic producers, Mexican product is attractive mainly as an occasional railcar purchase.

According to the ICIS Supply and Demand Database, the US consumes nearly 20,000 tonnes/year more PA than it produces.

Most of those additional volumes are imported from Italy and Mexico, with smaller amounts from Israel and South Korea.

Mexico exported nearly 30% of its total PA production in 2019, mostly to the US.

Italy’s sole PA producer, Polynt, exported 40% of its 2019 production, mostly to Spain and the US, where it is used internally.

In the US, Polynt-Reichhold has more than 250,000 tonnes/year of downstream unsaturated polyester resins (UPR) capacity.

Downstream production in the US and Mexico is projected to increase in 2021 but mostly remain lower than 2019 levels, according to the ICIS Supply and Demand Database.

“We do expect some recovery in 2021, so I would expect (downstream) operating rates to be higher in 2021 versus 2020,” said Gawaine Preston, ICIS polyolefins analyst. “I think plasticizers will follow this, as it is expected that markets will still be slow into 2021, mainly due to PVC (polyvinyl chloride) production in the region being lower.”

“We expect a full recovery in North American UPR production within three years, with a strong but partial rebound in 2022 to be completed in 2023,” said Valentina Cherubin, ICIS market analyst.

At the same time, Mexican PA production is projected to increase in 2021, while the US and Italy remain flat.

“Mexico looks to show a quicker rebound than the US in this market,” said Preston.

POTENTIAL NEW US CAPACITY
Polynt-Reichhold recently said it was evaluating its integration strategy for PA in the Americas, after announcing PA and maleic anhydride (MA) expansion plans in October 2019.

Some in the market have expressed scepticism about the potential project.

Additional US PA production that Polynt uses internally would free up domestic volumes for other customers and potentially pressure prices. However, the company’s integrated production would likely make it more competitive in the downstream market and potentially lower overall margins.

PA is used as a chemical intermediate in the production of phthalate plasticizers, as well as in UPRs.

Stepan and Koppers are the two US PA producers who sell to the market, while ExxonMobil produces PA for captive use.

Focus article by Antoinette Smith

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