OUTLOOK ’19: Demand for US MEK, IPA could rise on recovery from natural disasters

Adam Yanelli

28-Dec-2018

HOUSTON (ICIS)–Supply of US methyl ethyl ketone (MEK) and isopropanol (IPA) is likely to remain readily available in 2019, but storm- and fire-related recovery efforts could lead to increased demand.

Both solvents are used in paints and coatings, and can often see increased demand in the summer months when warmer temperatures lead to more home improvement and construction projects.

US MEK prices have trended lower all year, and are at their lowest since August 2017.

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Supply is expected to remain ample in 2019, but demand could see a bump.

About 60% of MEK demand is from the paint and coatings sector.

State and federal officials estimate that around 19,000 homes were damaged in California in 2018 from separate wildfires. Many more homes were damaged from winds and flooding associated with Hurricanes Florence and Michael.

MEK has not been produced domestically in several years, and the region relies on imports for consumption.

The top source for US MEK imports through the first 10 months of 2018 was the UK, where producer ExxonMobil has a plant, followed by South Africa, where Sasol produces MEK, and the Netherlands, where Shell has a plant.

It remains to be seen what effects the lingering trade war with China will have, but through the last quarter of 2018 importers of Chinese MEK have seen buyers look elsewhere for material because of 10% tariffs, which went into effect on 24 September.

Major MEK producers include ExxonMobil, Shell and Sasol, though their plants are outside the US.

In the IPA market, it remains to be seen whether increased demand will be enough to offset plunging upstream costs as the primary driver of prices.

IPA prices fell recently, and with a significant decrease in US November propylene contracts, there is sentiment among market participants that values could fall further.

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December propylene contracts settled lower this week, which would weigh on IPA prices in January.

Falling propylene is not the only feedstock weighing on prices. November barge acetone contracts also settled lower.

Acetone-based IPA makes up only a small percentage of the market, but falling acetone prices have incentivised producers of acetone-based IPA to lower prices aggressively.

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

Focus article by Adam Yanelli

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