US IPA further tightens although supply not as limited as some other propylene derivatives

HOUSTON (ICIS)–US isopropanol supply has tightened due to production issues resulting from last month’s winter weather event in Texas, and the market is seeing rising costs of propylene which had begun several months prior.

As a result of the tightening supply and increasing feedstock costs, prices for both contract buyers and spot players have increased in recent weeks, further widening price discrepancies between the US and Europe in the short run.

However, market participants have said that compared to other products, such as propylene glycol (PG), IPA’s supply is still available on the spot market, even if on a more limited basis and from different players than in before recent events.

RISING FEEDSTOCK COSTS
The current situation has been a perfect storm for propylene derivatives. Due to production setbacks and planned outages, propylene was already tight in the US in Q1.

Propylene contracts rose in Q4 2020 and January due to this tightening supply, impacting IPA contract buyers who use formulas incorporating the monthly propylene deltas.

In January, propylene contracts rose 12 cents/lb ($265/tonne), the largest increase in eight years. Market expectations for even higher monthly changes were set even before the winter storm which brought frigid temperatures to Texas and led to outages at several US IPA producers, including Monument Chemical and LyondellBasell.

February propylene contracts increased by a record-breaking 28 cents/lb, which drove up costs for both IPA buyers using formulas featuring propylene deltas and on the spot market.

Price increase nominations of 15-16 cents/lb were sought as of 1 March and were implemented.

US domestic prices are assessed at 86-90 cents/lb DEL (delivered)  US Gulf and spot prices are at 84-92 cents/lb FOB (free on board) US Gulf as of 4 March.

There are additional nominations of 6-7 cents/lb through the middle of March.

IPA TRADE DATA
January trade data shows a decline in imports from December, including among importers bringing in the most volume of IPA, outside of Canada. Canadian IPA is produced several miles from the US border.

Please check the ICIS Supply & Demand Database for more detailed trade data for IPA and many other petrochemicals.

Country	Nov-20 (tonnes)	Dec-20	Jan-21
Germany	44	2399	557
Japan	196	213	165
South Africa	351	602	350
Taiwan	311	357	161

US IPA exports in January also declined by more than 50% from December, leading to the lowest export numbers since last February.

Increases in IPA prices outpaced those of Europe in February and early March due to both higher feedstock costs and production issues.

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

Click here to the view the ICIS topic page on the deep freeze in Texas and the Gulf Coast and its impact on petrochemicals in mid-February

Focus article by Deniz Koray