US IPA prices continue slight decline amid easing supply; demand may improve for previously priced-out sanitary chem buyers

HOUSTON (ICIS)–Isopropanol (IPA) prices continue to decline, but at a more gradual pace than in recent weeks, as the market looks like it may have bottomed since IPA can be used by more industries at its new price level.

The leading cause of lower prices in recent weeks has been lengthening supply. Several major producers increased production in Q2 to keep up with surging demand in March and April. At that point, supply was extremely tight and almost all buyers were on partial sales allocations.

Demand during the summer, however, has not kept pace, surprising some participants who had expected IPA prices to rise again following an increase in coronavirus cases in June.

Some large domestic producers have indicated that they intend to reduce output, and at the start of the week, chatter was heard that a significant Asian producer would also cut production runs.

QUANTITY DEMANDED PICKS UP
As prices have come down, the quantity of demanded IPA has begun to pick up, and players expect this to continue in the near term. Buyers have begun to reconsider buying IPA instead of ethanol for sanitary products, including hand sanitizer, at the lower prices.

Hand sanitizer manufacturers can switch between ethanol and IPA although the process can be complicated due to government regulations.

As of 20 August, IPA was assessed at 65-75 cents/lb ($1,433-1,653/tonne) delivered (DEL) US Gulf.

In the spot markets, IPA is assessed at 63-73 cents/lb FOB US Gulf.

EXPORT MARKETS SLOWER
Export IPA prices have also come down. Prices are currently assessed at 58-70 cents/lb FOB US Gulf.

However, there is very little volume in export markets because prices of Asian imports to Mexico are too low for US suppliers to be competitive.

Several market players have said export prices are listed in case there is an interested buyer, but there is much less activity now than in the early summer because of aggressive pricing from Chinese suppliers.

In April, before the influx of Asian imports, IPA was very tight in Mexico.

In other parts of Latin America, market participants said hand sanitizers are more commonly made from ethanol, and supply remains ample in relation to demand. Therefore, there is not much interest in switching to IPA, particularly in South America.

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

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Focus article by Deniz Koray