OUTLOOK '14: MPG demand will depend on weather, PO set to grow

02 January 2014 11:30 Source:ICIS News

By Stefan Naidu

LONDON (ICIS)--The European monopropylene glycol (MPG) market is keeping one eye on the winter weather conditions and the other on the price movement of propylene, which is formula-linked to propylene oxide (PO), from which MPG is derived.

MPG industrial grade is used as de-icing liquid and prices were on the rise for most of Q4 2013 but remained largely stable in late November and December. Producers are hoping for an icy winter in order to boost demand, which has slowed as the year draws to a close.

“We cannot run our business based on weather forecasts,” a producer said.

“I can prepare [to the best of my abilities] for potential orders so we will keep our inventories as high as we can, but it is going to be reactive [to the weather conditions]. If there is a winter like in 2010/2011, it will press the market.”

The price of MPG will also hinge on the price of propylene, although the extent of the influence cannot yet be know, according to one buyer.

“If it is not as cold [as some producers are hoping it will be], then propylene will be more of a factor,” the buyer said.

Further upstream, MPG feedstock propylene oxide (PO) is set to grow by 3% in Europe next year, driven mainly by polyols/polyurethanes and glycols such as MPG. With global growth projected at around 5%, investment is focused in the Middle East and Asia – the latter projected to grow at 9%.

Dow Chemical’s world-scale Sadara project with Saudi Aramco in Jubail, Saudi Arabia, is proceeding on schedule and on budget for a 2015 start-up, with full production expected by late 2016.

Saudi Hydrogen Peroxide, a newly created joint venture between Sadara Chemical (Sadara) and the Solvay Group (Solvay), has begun constructing one of the world’s largest hydrogen peroxide to propylene oxide (HPPO) plants. It will have a capacity of 300,000 tonnes/year and is scheduled to begin production in 2015.

Northern China producer Shandong Jinling Chemical started commercial production at its second PO unit earlier this year, doubling its annual capacity to 160,000 tonnes/year.

A sense of optimism was expressed by a producer as macroeconomic conditions improve on the continent.

“We are seeing economic indicators turning more positive,” the producer said. “We [expect] good volumes in the PO merchant market [as well as] derivatives.”

No new investment is planned in Europe, but sources say operating rates at existing European polyols plants will be increased.

The increased polyol supply will be needed once Bayer MaterialScience’s 300,000 tonne/year world-scale toluene di-isocyanate (TDI) plant at Dormagen comes on line. The plant is on track for start-up in the second half of 2014.

Speaking specifically about polyols, which is the main PO derivative - accounting for 55-60% of consumption - the producer went on to say that the European automotive industry has seen a small year-on-year rise in activity from 2012-2013 and it is preparing for good first quarter 2014 demand from the bedding, furniture and household sectors.

By Stefan Naidu