OUTLOOK ’18: US IPA market anticipating continued balance, stronger demand

HOUSTON (ICIS)–US isopropanol (IPA) market participants are anticipating a demand surge in the first half of 2018 from storm- and fire-related recovery efforts.

While December IPA spot and contract values were trending flat on market balance, a belated seasonal downturn and only a moderate gain in feedstock propylene, the first quarter will bring an uptick in buying interest, sources said.

Prolonged Q4 demand was partly attributable to the short-term needs of businesses and homeowners flooded  when Hurricane Harvey struck the US Gulf coast in late August.

One chemicals producer said the unusually strong demand so far into the fourth quarter made it seem as if the spring/summer coatings season never ended.

Additionally, storm damage in Florida and other southeastern states from Hurricane Irma and current and recent wildfires in California will drive spring demand beyond its usual seasonal lift.

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

“You would think that with all the rebuilding to come in Texas, Florida, California, the US Gulf and other regions, construction-paint demand will be strong,” a buyer said.

Although a distributor said it was not yet factoring storm recovery into its initial sales projections, it was “optimistic”, adding that IPA demand generally seems to be decent, and that it is “hoping for a positive increase in sales next year”.

Supply, which was constrained in the US Gulf coast region by Harvey beginning in late August and continuing well into October, has balanced with demand.

And sources expect market balance to the be the near-term norm.

Also keeping pressure on pricing will be transportation issues.

Although compromised logistics in the US Gulf region have returned to pre-Harvey levels, problems still exist.

“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 last rollover held the November IPA consumer range at 71-73 cents/lb DEL (delivered), as assessed by ICIS.

IPA is a solvent principally used in industrial and consumer products including cosmetics and personal-care products, de-icers, paints and resins, pharmaceuticals, food, inks and adhesives.

US IPA suppliers include ExxonMobil, DowDuPont, LyondellBasell, Monument Chemical and Shell Chemical.