Despite limited demand, higher propylene costs and snug supply push US IPA costs up

HOUSTON (ICIS)–Although there is presently tepid demand for isopropanol (IPA) and transaction volumes are low at the start of Q1, the continuing rise in propylene contract and spot values is placing ongoing pressure on the domestic IPA market.

IPA is a propylene derivative, and under normal market conditions, IPA and propylene prices are heavily correlated. Propylene values can also serve as leading indicators for IPA prices.

Last year’s sudden rise in IPA prices during late Q1 and early Q2 was a rare exception, where IPA prices soared while propylene declined and then experienced a slight increase.

However, as propylene spot and contract prices have reached their highest levels in several years, US IPA prices have also increased despite lukewarm demand.

January propylene contracts settled up 12 cents/lb ($265/tonne), the largest monthly increase in the last eight years.

This also marks the steepest increase over a two-month period since 2011. December propylene contracts settled up 10 cents/lb.

Propylene prices have been gradually trending upward since June although the most significant uptick has occurred since early November. Spot and contract values have almost doubled in that time frame.

IPA prices have not risen as rapidly. Unlike propylene, IPA prices have been higher, due to unprecedented demand last spring following a run on hand sanitizers at the start of the coronavirus pandemic.

Despite falling considerably in H2 2020 once supply was adequate, IPA prices remained above their pre-pandemic levels.

However, despite soft demand in early 2021, rising feedstock prices have nudged IPA prices up.

EXPORT, DOMESTIC PRICES FACE PRESSURE
In addition to rising propylene costs, supply has been constrained due to limited Asian imports. Higher costs for shipping containers out of Asia have reduced the number of imports in addition to increasing their cost.

There have also been some production issues in South Korea which hampered imports to the West Coast.

As container costs continue to rise in global shipping, sources said Latin American buyers may be more heavily impacted than buyers in the US IPA market, who are insulated by the large number of domestic producers.

IPA exports historically trade at a discount to domestic and spot prices. However, some market players heard of cases where export prices sold at a premium to US prices.

Pending further confirmation, export prices were assessed with lower – but still noteworthy – deltas. In the past two weeks, IPA export prices have increased 8 cents/lb on the low end and 11 cents/lb on the high end.

They are assessed at 60-67 cents/lb FOB (free on board) US Gulf.

US domestic and spot prices have risen incrementally.

Last week, domestic prices rose 4 cents/lb on the high end but were unchanged on the low end. They are assessed at 65-73 cents/lb DEL (delivered) US Gulf.

Spot prices ticked up 1 cent/lb and are now 65-70 cents/lb FOB US Gulf.

Several sources said there is currently a wider-than-normal disparity in prices from major producers.

The price chart below shows US IPA prices for the past 12 months.

One new price increase nomination was observed by multiple market participants.

Company	Product	Date	Targeted Increase
Exxon	IPA	28-Jan	7 cents/lb

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

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Focus article by Deniz Koray