With the year 2023 now into its second half, plasticizer and oxo-alcohol markets remain relatively stagnant globally. Demand failed to pick up as hoped and ongoing economic pressures left markets languishing in a slow demand cycle for many months.
The softness of the construction market – a significant PVC/plasticizers consumer – has had a strong impact on global markets this year.
The US plasticizers sector began 2023 afresh following a heavy period of de-stocking during the fourth quarter of 2022 when demand slowed down dramatically.
However, hopes of a rebound in Q1 were quickly dashed. This was largely due to downstream stock levels reflecting what turned out to be more than sufficient for the then-current demand level.
"US-based 2-EH acrylate producers benefited from decent demand in sectors such as cetane improvers and agriculture, supporting them in Q1 to a degree."
~Tecnon OrbiChem senior consultant Rachel Uctas
Operating rates for US-based plasticizer plants remained reduced but with the disappointing level of demand from the construction market – as well as the increasing presence of imports – the US market was still amply supplied. Prices have eroded throughout 2023 to date, although they have not fallen quite as steeply as they have in Europe.
Competition for volume in the face of an increased interest in importing plasticizers from outside the US has been one of the factors driving the recent price erosion.
2-ethyl hexyl acrylate (2-EH) producers in the US have seen a decent level of demand from sectors such as cetane improvers and the agricultural industry, which supported the market in Q1 to a degree. However, in Q2, demand from the agricultural sector became seasonally weak, and the 2-EH market reported disappointing demand. The US propylene market was hit by a period of tightness leading propylene contract prices to shoot up in Q1, and 2-EH producers were hit by high production costs at a time when demand was very soft. Costs have reduced in Q2, as propylene supply has normalized.
Soft State of Demand
Hopes that Q2 could herald an improvement in plasticizer demand did not result in a material change, and as such prices have continued to lose ground.
Anticipation then moved to Q3 as a possible period of demand recovery... The Organization for Economic Cooperation and Development (OECD) is projecting global GDP growth at the very modest 2.7% level in 2023. Therefore Q3 is unlikely to deliver much by way of growth when the numbers for this quarter are crunched. The OECD figure represents the lowest annual rate since the global financial crisis.
In the background, high inflation rates, and recession fears remain a barrier to growth, especially in the beleaguered housing market.
Automotive demand has been more supportive generally in 2023, with an overall growth rate longingly anticipated for the year. This was off the back of strong sales in the US in particular but also in the UK.
The necessity to catch up in vehicle production as raw materials have become more available post-Covid was largely behind this. Will it sustain throughout Q3 and Q4? That's the burning question on the lips of automotive market participants and their suppliers...
The European plasticizers market languished in the doldrums during 2023 as buyers postponed or cancelled orders and continued to purchase only for short-term requirements.
Producers have continued to operate European 2-EH and plasticizer plants at reduced rates in line with demand. Imports of all general-purpose plasticizers have been competitive, as freight rates fell and the local markets in Asia failed to show any demand improvement, particularly China on which hopes had been pinned.
As gas prices and propylene costs have gradually come down, oxo-alcohol producers have been less squeezed.
Those lower prices, however, have not been sufficient to stimulate downstream demand. Even when force majeure events and unexpected outages have occurred in the 2-EH market, there has been no significant impact on the market, and prices have continued to soften, illustrating the soft state of demand.
Ineos declared force majeure on oxo-alcohols in April due to a wave of strikes in France which affected its Lavera site, and at the same time, Germany-headquartered OQ was on turnaround.
However freely negotiated 2-EH prices continued to move down, with demand from all downstream sectors failing to rebound.
"...As gas prices and propylene costs have gradually come down, oxo-alcohol producers have been less squeezed..."
~ Rachel Uctas
Alternative 2-EH key demand sectors such as 2-EH acrylates have been weak, and the outlook for H2 is much the same as it was in the first half.
Buyers up and down the plasticizers chain had built up stocks to such an extent when the market was tight during the first half of 2022 that the subsequent market slowdown has meant that inventories were still being worked through well into 2023. Key applications for PVC - such as roofing and flooring - have suffered from the poor performance of the European construction market, which shows no sign of recovery this year.
Automotive demand is quite stable but still well below pre-Covid levels. There is nothing to suggest any change to the plasticizers market dynamics for the second half of 2023, and with the ongoing war in Ukraine, there are no real bright spots in the European economic outlook.
Changing Markets for China
In China, plasticizer prices moved up in January along with 2-EH prices, then fell back in February owing to slow demand recovery after the holiday. Prices only fluctuated slightly from March to May.
Prices went up rapidly in early May along with 2-EH prices, then plunged together with 2-EH prices due to increased supply and reduced restocking activities.
Demand for DOP imports has remained weak amid plenty of supply in China, while China has been exporting more DOP.
China imported 507 tons DOP in the first four months of 2023, 82% lower than that in the same period of 2022, while China exported 8163 tons of DOP from January to April 2023, 98% higher than for the same period in 2022.
"China's early 2023 2-EH imports were higher than the same period in 2022 and the country's DOP exports almost doubled YoY in 2023's early months."
~Tecnon OrbiChem senior consultant Carol Li
Competition for volume has been strong amongst domestic players and in response to imports.
TOTM (tris(2-ethylhexyl)trimellitate) - an alternative plasticizer for PVC medical devices - saw very sharp price erosion early in the year. But TOTM was not alone and all plasticizers markets saw prices moving down substantially.
Some PVC compounders were opting for lower-priced plasticizers - such as DOTP - in certain cable applications (where workable). Their sacrifice of some of the high-performance elements of these plasticizers came at the expense of DPHP and DIDP markets.
The trend created a more competitive environment for these two higher-priced plasticizers as producers attempted to maintain, and/or regain market share. While January had seen 2-EH prices rise, due to limited supply caused by turnarounds and restocking demand before the holidays, they soon fell based on slow demand improvement after the holiday period.
Propylene costs in Europe have been the highest in the world for most of the year apart from a brief period in March when US prices rose substantially.
This has added to the pressure on the European industry to compete globally. There wasn't a sign of any fundamental pick-up in demand in Europe as Q3 started. Most market players were therefore looking to 2024 horizons for signs of improvement. Even then, the level of optimism is not very high.
Prices surged in early May caused by the unexpected shutdown of Luxi, then moved down rapidly as buyers showed strong resistance to soaring prices complaining of poor production profits of plasticizers.
China's early 2023 2-EH imports were higher than the same period in 2022 and the country's DOP exports almost doubled YoY in 2023's early months.
US n-butanol demand was a little better than in Europe but has mainly proven fairly soft this year, with demand in downstream markets remaining quite flat. The softness of the housing market, high inflation, and rising interest rates in the US have been the main drain on market confidence.
Optimism about market performance for the rest of the year has waned as the recession loomed. A blog post published by Tecnon OrbiChem parent company in July The verdict is out: Were in the starting phase of a recession explores the issues at hand.
The European n-butanol market was heavily impacted by the high cost of natural gas in 2022, leading to rising prices in Europe.
However, natural gas prices have been edging downwards for the whole of the year to date, taking pressure off European producers, and are currently pegged at around €23/MWh in early June compared with €82/MWh a year ago. High propylene costs however have remained, compared to other regions.
Demand from the coatings sector is still soft, in line with the weakness of the construction market performance this year. Downstream products such as butyl acrylate and butyl acetate have been particularly hard hit.
In China, n-butanol prices went down in the first two months of 2023 as producers cut down offers to relieve inventory pressure, then improved in March supported by restocking demand and turnarounds of n-butanol producers.
Prices went down in April after restarts of n-butanol plants. Prices went up sharply in early May as producers raised offers based on tightened supply caused by the unexpected shutdown of Luxi, and then prices fell owing to thin buying interest at higher prices and increased supply. China imported 66kt n-butanol in the first four months of 2023, 42% higher than that in the same period of 2022.
In China, plasticizer prices - along with 2-EH prices - rose briefly, and then fell in Q1 2023, owing to slow demand recovery after the holiday. Generally, the plasticizer sector's H1 was characterized by only slight fluctuations. But in early May, both plasticizer and 2-EH prices rose rapidly, before plunging due to increased supply and reduced restocking activities.
Demand for DOP imports was largely weak amid plenty of supply in China, while China has been exporting more DOP. In fact, China's exports nearly doubled for the January to April 2023 period, compared to 2022.
Amid limited supply, 2-EH prices were higher as the year began. That market tightness followed turnarounds and restocking demand before the holidays, but prices fell swiftly as demand slowed.
Prices surged in early May caused by the unexpected shutdown of Luxi, then moved down rapidly as buyers showed strong resistance to soaring prices, complaining of poor production profits for plasticizers.
Plasticizer Pricing Structures
Across the full portfolio of plasticizers Tecnon OrbiChem monitors, prices often fluctuate based on market trends and movements our consultants follow daily.
Price points for the plasticizers DOTP and DINP for example, diverged in 2020 following a tendency to match. We explored this issue, along with others in our blog post, An Investigation of Plasticizers in the 21st Century.
Consultants from ResourceWise company Tecnon OrbiChem publish white papers and/or eBooks relevant to the plasticizer industry - including its feedstocks - at least twice yearly. They delve into the constantly updated datasets in our business intelligence platform OrbiChem360 to deliver insights useful to the wider industry sector and related value chains.
This blog post is inspired by an eBook first made available to OrbiChem360 customers and Tecnon OrbiChem blog subscribers at the end of June 2023.
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