US MEK buyers expect price hike because of Europe force majeure

Focus story by Lane Kelley

HOUSTON (ICIS)–US methyl ethyl ketone (MEK) buyers expect prices to jump again soon because of a fire at a European refinery in late July, sources said on Friday.

The expectations are based on announcements by ExxonMobil and Sasol made separately this week that would raise MEK prices by 10 cents/lb ($220/tonne) on 15 August.

A distributor said the reason for the increase is Shell’s force majeure (FM) declared on MEK and some other chemicals because of the fire at the company’s Pernis refinery in the Netherlands in late July.

“Nobody will say that, of course,” the distributor said. “The way you say it is that it’s due to supply and demand.”

ExxonMobil and Sasol attributed the August price increases to “market conditions” in their separate announcements. ExxonMobil also cited “recent increases in feed values”.

The Shell plant near Rotterdam in the Netherlands has MEK capacity of 90,000 tonnes/year.

The distributor added that supply has tightened since the incident at Shell’s European refinery.

“You can’t get extra product right now,” the distributor said.

There is only one MEK plant based in the US, ExxonMobil’s 135,000 tonnes/year unit at Baton Rouge, Louisiana.

American MEK sources said they have not been able to buy material from the plant in years, with some saying ExxonMobil uses all the material made there for internal use.

That is why all the MEK bought in the US depends on imports, largely from Europe and South Africa. It is also why a refinery fire in Europe could prompt price increases in the US a week later.

The ExxonMobil official who signed the company’s August price increase notice, Jim Sotirchos, said on Friday that he could not comment on plant operations.

A US buyer who depends on spot purchases of MEK said the spot price (ex-tank US) has increased to 61-65 cents/lb in the past week from 57-61 cents/lb a week ago, though it could not be confirmed.

The buyer doubted that MEK customers will accept a 10 cent/lb increase so soon after a 5 cent/lb increase in July. But the buyer added that producers do have some leverage at this point.

“I think a big part of it [the 10 cent/lb increase will go through,” the buyer said.

A source close to Mitsui said this week that customers had accepted the supplier’s August price increase, which called for a 3 cent/lb hike plus another 2 cent/lb that was negotiable, based on the customer’s volume.

“Most of them are within the low side of the increase,” the source said.

Major US MEK suppliers include ExxonMobil, Shell and Sasol.

Pictured above: panoramic view of Shell’s Pernis complex in the Netherlands (source: Shell)