Outlook '18: Europe AA, acrylate esters supply to ease, demand flat to increase

27 December 2017 11:00 Source:ICIS News

LONDON (ICIS)--When it comes to considering how the European acrylates market will look in 2018, a lot seems to ride on supply.

The demand picture is a bit clearer as it is expected to be flat to slightly up in line with GDP (gross domestic product) growth, particularly for acrylic acid (AA), and with the potential to be up by around 5-6% as a maximum for some of the acrylate esters.

A reasonably positive estimate for an established market.

AA is used as a raw material to make superabsorbent polymer (SAP) for the manufacture of disposable nappies, surgical pads and other personal care items.

Acrylate esters are used to make paints, coatings, textiles, adhesives, polishes and plastics; and they include methyl acrylate (MA), ethyl acrylate (EA), butyl acrylate (BA) and 2-ethylhexyl acrylate (2-eha).

So, what about supply?

There are a few factors that have been talking points. There is new capacity coming onstream, the termination of the StoHaas joint venture, logistical concerns, as well as lingering supply constraints that have been present in the market in the fourth quarter of 2017.

Nippon Shokubai is bringing a 100,000 tonne/year AA plant on line at Antwerp in 2018, along with an SAP plant of the same capacity. There is no acrylate esters capacity planned for the site.

Once production is running as planned, it could have an impact on imported volumes in that there could be less of a market for them, and players exporting to Europe might need to fight for that.

And with this new AA production in Belgium, it could create additional demand for key feedstock propylene in Europe, which has supply and cost implications upstream.

But, if there is more AA available it could be a somewhat long market in 2018. Margins could then be under pressure if raw materials are priced high and AA prices are low. However, there is also the possibility that any excess AA could be converted into esters.

With regards to the StoHaas joint venture (JV), some players wonder whether there might be a few lines cut at Marl. In early December, Evonik announced that their 50:50 JV with US chemical major Dow Chemical for production of AA was to be terminated.

The JV was set up in 1999 and consisted of two production sites: one in Germany and the other in the US. Now, each facility will go back to the original owner. The facility in Marl, Germany will be owned by Evonik, effective 31 December.

The plant in Deer Park, Texas will go back to Dow’s ownership and will belong to the newly formed DowDuPont.

In addition to AA, BA is likely to also be long. Supply in Europe remains healthy, and there are imports from Russia and Asia also lengthening availability.

Supply for the remainder of the esters is more on the balanced to snug side. And should any interruption to production result in tighter 2-eha supply than was seen in the fourth quarter of 2017, there is the potential that some players will opt to use BA instead of 2-eha, where applications allow.

After a series of planned and unplanned outages in 2017, most plants are returning to maximum capacity. However, with no new investment in western European acrylic monomer in 15-20 years, an unplanned outage is not necessarily an unexpected one.

When there is disruption to production, it generally tightens the market quickly and the impact on pricing can be dramatic.

Availability of 2-eha, EA and MA is a bit limited after supply hiccups in 2017, which saw prices reach three-year highs in some cases, and these products are expected to be snug for at least the first part of the first quarter.

Plant closures in China, driven by the environmental clean-up campaign there, are something to watch but there are so many unknowns with regards to which plants, the capacities in question, and the timing.

One of the challenges for the industry, not only acrylates but the European chemicals industry in more general terms, might be transport.

A shortage of truck drivers has caused delays to deliveries in 2017 and this is expected to be an ongoing challenge in 2018; one which is resulting in an increase in costs in the supply chain.

AA and the esters will act as somewhat different markets in 2018 in terms of supply and demand. But availability overall is expected to be easier than in 2017.

By Helena Strathearn