OUTLOOK ’18: US acrylates expected balanced-to-tight amid strong demand

HOUSTON (ICIS)–US acrylic acid and acrylate esters markets are anticipated balanced-to-tight early next year as supply attempts to keep up with stronger demand.

Although market sources were seeing a belated seasonal downturn in December and only a moderate gain in November feedstock propylene, a return to snug supply in the new year would exert some price pressure on the domestic acrylates markets.

Others argue that pricing will be driven more by raw materials in the new year.

On that front, however, propylene supply increases may weaken the feedstock in the near term.

Recent supply constraints largely originated with Hurricane Harvey, which struck the US Gulf coast in late August 2017. And some resultant supply limits were expected to remain in place through the end of 2017 or beyond.

Market balance, however, has been mostly restored in the four months since Hurricane Harvey struck the US Gulf coast.

Barring unplanned operational outages, supply is expected to remain mostly steady-to-tight through the first half of next year, which will encompass the US spring paint and coatings season in the second quarter.

Adding to supply pressure will be pent-up demand for paint and coatings after Harvey, storm damage in Florida and other southeastern states from Hurricane Irma, and current and recent wildfires in California.

Each is expected to heighten construction demand early next year.

That prolonged Q4 demand is partly attributed to the short-term needs of businesses and homeowners flooded during Harvey.

Although many storm renovations have begun, repainting is likely to see a strong surge early next year. Some Houston, Texas homes flooded during Harvey have only recently completed mold remediation and had wallboard re-installed.

While storm-related transportation problems have all but dissipated, the logistics issues faced by chemical makers and buyers before Harvey persist.

“Suppliers are still requesting lead times of 7-10 days versus one to three days in the best of times,” another buyer said.

“Truck transport was problematic even before Harvey because there were too few drivers,” the buyer said, “and that is not going to really improve any time soon. Although there seem to be plenty of trucks on the road, there are still not enough. So producers are keeping long lead times in place.”

The glacial acrylic acid (GAA) free-market range was 98-106 cents/lb FD (free delivered) for November, as assessed by ICIS.

Acrylates are commonly used to make products including paint and coatings, plastics and construction and pressure-sensitive adhesives.

Suppliers of US acrylates include Arkema, BASF, DowDuPont and Sasol.