Constrained 2-EH, PVC supplies limit US PA demand into plasticizers

Author: Antoinette Smith

2021/02/25

HOUSTON (ICIS)--Lingering effects from a winter storm that disabled more than half of US 2-ethylhexanol (2-EH) production likely will limit demand for phthalic anhydride (PA) into plasticizers.

US production of PA - which along with 2-EH is used to make plasticizers, mainly dioctyl phthalate (DOP) - is located mostly in the Midwest and was not physically affected by the storm in the US Gulf coast.

The storm idled 56% of US 2-EH capacity, according to the ICIS Supply and Demand Database, leading to separate force majeure declarations as follows:

Company Location
BASF Freeport and Pasadena, Texas
Dow Texas City, Texas, and Europe

Imports of 2-EH into the US historically have comprised less than 10% of total consumption, and global supply has been tight in recent weeks, making imported volumes unlikely to replace idled production.

Further downstream, storm-related outages in polyvinyl chloride (PVC) plants in Texas and Louisiana have cut production by as much as 70%.

Plasticizers in the US are used predominantly in flexible PVC to provide elasticity to PVC film, roofing, flooring and wall coverings.

US PVC production is not expected to start to return to pre-storm levels until May.

CONTINUING LOW DEMAND
Throughout 2020, US PA demand was below normal amid the coronavirus pandemic.

US-based producer Koppers reported a year-on-year decrease of 12% for Q4 2020 sales from its Carbon Materials and Chemicals segment, which includes PA.

Sales were lower in every region except Europe, said Michael J. Zugay, CFO and treasurer at Koppers, during the company's earnings call on 24 February.

The pandemic has led to a general market slowdown, Zugay said, which translates into weaker US demand for PA.

In its Q4 2020 earnings call on 18 February, US-based Stepan also noted lower PA demand that partially offset growth in its polymers segment, with its 2020 global polymer sales volumes down by 5% year on year as a result of lower demand with the PA business.

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

PRICE PRESSURE FROM FEEDSTOCK
As a result of the storm, all US feedstock orthoxylene (OX) capacity was idled.

PA producers in the Midwest fill tanks with OX in preparation for hurricane season - June through November - as well as the potential icing of the key Illinois river waterway during winter, so the effects of lack of feedstock production and logistics issues are yet to be felt.

In the week of 22 February, Flint Hills Resources - one of only two OX producers in the US - was preparing to restart its East and West plants in Corpus Christi, Texas.

Even before the freeze, PA producer Stepan saw prices for key raw materials - OX, and diethylene glycol (DEG) in the polymers segment - increase with crude oil gains, said Quinn Stepan, chairman, president and CEO, during the company's earnings call.

"I feel very comfortable in terms of our ability to recover the raw material price increases in our base business, not sure currently how the current situations can impact our business in February and March," he said.

OX is the second largest of the three commercial isomers of xylene and it is almost entirely used in the manufacturing of phthalic anhydride, which is converted to plasticizers, alkyd and polyester resins.

Major US OX producers are ExxonMobil and Flint Hills Resources.

Focus article by Antoinette Smith

Click here to view the ICIS Coronavirus, oil price crash - impact on chemicals topic page.

Click here to view the Automotive - impact on chemicals topic page.

Click here to view the Construction - impact on chemicals page.