Europe IPA sellers push for May increases on rising feedstocks, squeezed margins

LONDON (ICIS)–European isopropanol (IPA) sellers are separately targeting price increases for May on the back of squeezed margins against feedstocks.

The major European and non-European producers have separately announced IPA spot price increases for May ranging from €20-50/tonne, or £25/tonne in the UK, according to market sources.

The price increases are an attempt to improve margins following a squeezed situation in the first and second quarter of 2018.

“Producers raised prices [by] €25-50/tonne. Propylene rose by €25/tonne, which gives an argument to raise [IPA] between €18-20/tonne,” one buyer said.

However, many prices are still under negotiation with further feedback expected later in the month.

“[I am] not sure how discussions have gone so far. Talk following propylene discussions only closed on Friday, [we need] a few more days,” one seller said.

Producers are targeting increases because feedstock prices rose for May, with the upstream propylene contract price increasing by €25/tonne and crude oil also trending upwards.

“[After] 9 months of continued price declines, and quite a few months of increases in propylene, we are in a critical situation in terms of margins,” one producer said.

The cost spread between IPA and propylene has narrowed significantly in 2018 after hitting a record high in the second half of 2017.

The European market is also fairly balanced in terms of supply and demand, with warmer weather expected to bring about an increase in consumption for the paints and coatings and construction sectors.

“[There is] solid underling growth even if indicators slowed a little bit, demand is still growing,” a producer said.

In addition, high US IPA prices and the consequent greater focus of producers on their domestic markets leave fewer alternatives for buyers in terms of imports, with the weakening of the euro against the dollar also contributing to lower competitiveness.

“[The] market is definitely not long, [there is] not a wide choice of comparison for buyers,” one trader said.

Technical grade spot prices were assessed at €960-1,000/tonne FD (free delivered) NWE (northwest Europe) on 1 May, a rollover from the previous week.

IPA is a solvent used in many industrial and consumer products and as an extractant. Applications include cosmetics, personal care products, de-icers, paints and resins, pharmaceuticals and inks and adhesives.

Pictured: Personal care products, one of IPA’s end markets
Source: Jochen Tack/imageBROKER/REX/Shutterstock

Focus article by Chris Barker

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