Europe oxo-alcohols trundle through July amid hopes of post-summer revival

European oxo-alcohol players are bracing themselves the for the summer season and pinning hopes on a degree of revival in demand in September.

- Tough H2 market conditions expected

- DOTP potentially to support 2-EH

- Structurally long NBA and IBA under pressure

It is the first time in over two years that the market is adjusting to both lower spot prices, but also such good availability.

The economy has slowed down, and profit warnings from the likes of petrochemicals majors like BASF are adding to those fears.

“There is some sluggish demand and no one has seen this so-called pick-up in demand in June,” a producer said.

The European n-butanol (NBA) market is structurally oversupplied and the availability disruptions since late 2016 to late 2018 have now disappeared, leading to a more normal situation.

Isobutanol (IBA), which is essentially seen as a bi-product or 'the problem child' of the oxo-alcohols range, has recorded a surprisingly high amount of competition on the spot market of late.

For 2-ethylhexanol (2-EH), there has been some additional pull of product to new downstream dioctyl terephthalate (DOTP) production, while export markets have been quite robust.

However, sentiment in this market has also turned, and spot prices have fallen.

MORE SUPPLY

There is potentially still another DOTP plant due to start in 2020 from Oxea, with a production capacity of 60,000 tonnes/year.

Oxea's original plans were to start up the unit in 2019, but both the current economic climate and more capacity additions elsewhere delayed the planned start-up.

Capacity additons include SIBUR's new 100,000 tonne/year site in Russia and Grupa Azoty Zak’s new 15,000 tonne/year line in Poland.

DOTP is currently well supplied in Europe, with some heightened competition over market share and offers for Russian, South Korean, US, and Turkish material.

As the market now trundles towards the traditional summer slowdown, sources agreed this is currently a buyers’ market.

However, while there may be some cost and supply advantages for buyers, all parts of the chain are suffering in the current global macroeconomic climate.

Looking ahead, the next round of cracker maintenance is focused on September/October, which could limit feedstock propylene.

However, there will not be significant oxo-alcohol shutdowns, so ultimately supplies should remain healthy.

HOPES FOR RECOVERY

Market players are hoping demand will rebound in September after the summer break.

At least one major is running units at approximately a third of its usual capacity in order to balance stocks, especially ahead of and during the summer period, according to sources.

Some buyers said they were considering changing buying patterns to adjust to the changing climate, and a couple of consumers said there are plans to reduce contracted volumes in 2020.

This would and leave a greater proportion of material for the spot market as further opportunities show themselves compared to the past couple of years.

In a week when BASF’s shares were down after the business suffered “sharply weaker than expected” trading, the second half of 2019 is likely to deliver further challenges to business conditions for European oxo-alcohols.

NBA is a solvent with more than half if its production used as an intermediate chemical in the production of butyl acrylates for paints, coatings and adhesives, or acetates and glycol ethers.

2-EH is used to make plasticizers. Key end markets include the construction, appliance and automotive industries.