OUTLOOK '18: US plasticizer market anticipates pressure amid tightness, strong upstream pricing

08 January 2018 19:00 Source:ICIS News

HOUSTON (ICIS)--The US plasticizers market firmed in the latter half of 2017, and market players expect pricing pressure to carry into 2018 amid some lingering tightness well as strong upstream pricing in crude and propylene.

Plasticizer prices began rising when Hurricane Harvey hit the US Gulf Coast in late August, disrupting production of dioctyl terephthalate (DOTP) and upstream propylene, 2-ethylhexanol (2-EH) and orthoxylene (OX). Both BASF and Eastman shut down their Texas DOTP plants, which also affected BASF’s production of 2-EH in Pasadena.

While hurricane-related pricing spikes in plasticizers eroded somewhat toward the end of 2017 on lower holiday-period demand, some snugness remains heading into 2018.

Combined with sentiment that upstream pricing will remain firm, the market foresees the pricing pressure in late 2017 to carry over into 2018 – at least in the first part of the year – amid continued tightness in plasticizers and upstream, as well as several other variables.

Some market participants said plasticizer and oxo-alcohol pricing has not kept pace with oil, squeezing margins for producers. Crude pricing looks to remain strong, so the market anticipates that being a driver. The propylene market is also expected to remain firm, and market players anticipate slightly tightened phthalate supply.

Meanwhile, demand is expected to be strong in 2018, especially in the construction and automotive industries as both deal with post-hurricane recovery efforts. At the end of 2017, the market had already started to see an uptick in demand for material to reconstruct flooded homes and replace damaged vehicles in Texas and Florida following Hurricanes Harvey and Irma. Some sources expected the recovery efforts to be a boon to the plasticizers market through the second quarter of 2018, but then to taper off.

"We will see higher-than-usual demand in construction and automotive because of the hurricanes," a market source said. "We are seeing it already ... rebuilding will pull a lot of material."

Another issue is that no new plasticizer capacity is scheduled to come on-stream anytime soon, and many plants are aging. The market expects an increased number of unplanned outages due to issues at older plants.

Sentiment is that all of these variables point to some moderate price increases.

"Because of all the uncertainty, we are taking things quarter by quarter," a market source said.

Plasticizers are additives that increase the plasticity or fluidity of the material to which they are added. Globally, about 96% of plasticizers are consumed in flexible polyvinyl chloride (PVC) applications, including cables, PVC films, roofing, flooring and wall coverings. In the US, 80-90% of plasticizers are used in PVC applications.

Eastman, BASF and ExxonMobil are the three major plasticizer producers in the US.

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By Amanda Hay