Chemical profile: US monopropylene glycol

06 June 2014 10:07 Source:ICIS Chemical Business

The primary outlet for monopropylene glycol (MPG) is unsaturated polyester resins (UPRs), which are used in surface coatings and glass fibre-reinforced resins. The second largest consumer is functional fluids such as de-icers and antifreeze.

MPG is also used in plasticisers and hydraulic brake fluids. Other uses are in non-ionic detergents and as a humectant in the pharmaceutical, cosmetics, animal foodstuffs and tobacco industries. It is also an excellent solvent and extractant.

UPRs are the largest end use for MPG in the US with demand heavily influenced by construction industry trends and the overall health of the local economy. UPRs are primarily consumed in the construction, marine, and transportation industries.

The antifreeze market, which includes engine coolants, has increased its use of MPG, although it accounts for a small percentage of the total worldwide market.

Supply of MPG in the US market has been tight on the strong demand in the winter from the downstream de-icing and antifreeze sectors. Surfactants demand was also said to be strong. Current supply tightness in the 2014 second quarter has been attributed to sellers looking to build inventories ahead of planned turnarounds.

In late April, Huntsman was forced to shut down its manufacturing facility in Port Neches, Texas, because of electrical equipment failure. The unplanned shutdown impaired supply of its propylene glycol/dipropylene glycol (PG/DPG).

The company did not implement a comprehensive allocation programme, nor did it reduce deliveries at the time of the shutdown, it said.

Demand is expected to strengthen as activity in the US construction industry ramps up after being delayed by prolonged winter weather throughout much of the country. In addition, the summer months should see a bump in demand from the downstream antifreeze/coolant sector, which typically starts its re-canning season in July.

MPG contract prices for June are expected to be steady to down slightly, as market participants expect freely negotiated contracts to be rolled over and formula-dependent contracts follow feedstock propylene contract pricing down.

US MPG monthly contracts are strongly influenced by the delta of the previous month’s propylene contract price and generally follow formula-based pricing.

Formula pricing can be equivalent to two-thirds of the monthly delta of propylene or two-thirds of the propylene contract price plus an adder number, depending on which formula market participants use.

Monthly MPG trends also take into account pricing based on negotiations between buyers and sellers that are not dependent on the formula pricing.

MPG prices are on average 20% higher in the 2014 second quarter compared to the year-ago period, following several months of price increases by producers in late 2013 and early 2014 in response to a tight market and strong demand. Prices started to soften in March 2014.

Contract prices for May have been assessed by ICIS at 94.65-102.98 cents/lb ($2,087-2,270/tonne) FOB industrial-grade; 85.00-93.98 cents/lb FOB antifreeze-grade; and 100.65-108.98 cents/lb FOB pharmaceutical-grade.

MPG is produced by the hydration of propylene oxide (PO), and the reaction also produces dipropylene glycol, tripropylene glycols and small quantities of higher glycols.

MPG production is driven by PO availability and extra MPG can be produced to ­balance PO.

There has been a lot of interest in producing MPG from renewable resources such as glycerine, a by-product in biodiesel manufacture.

Hong Kong-based Global BioChem Technology Group and US-based Archer Daniels Midland (ADM) are the two companies that produce MPG from renewable resources. Global BioChem started bio-based MPG production in 2008 and ADM began production in March 2011.

Delayed ramp-up in construction activity is expected to firm up demand in the near term, but market sources generally expect pricing to stay steady to soft. The start of the antifreeze re-canning season in July is expected to also boost demand.

Demand in winter will be driven by the de-icing, especially for aircraft, and antifreeze sectors.

Meanwhile, many additional smaller uses for MPG will show varying degrees of growth in coming years, with functional fluids and personal care products showing the greatest potential for growth in the US.

Sales in the primary markets for MPG – UPRs and a variety of industrial uses – will depend on the performance of the general economy.

By Feliza Mirasol