Market Updates - CORECHEM Inc.

Polar Storms Paralyze Chemicals

February 19, 2021

MANY chemicals have been severely affected by the winter storms Uri and Viola that rocked the Gulf Coast region this week, including Propylene Oxide, Propylene Glycol, Hydrocarbons, Acetone, Isopropyl Alcohol, P-series Glycol Ethers, E-series Glycol Ethers, Chlorine, Caustic Soda, and Hydrochloric Acid, to name a few. The weather crisis has caused dozens of plant outages, a flurry of Force Majeure notifications, and in some cases a shortness of supply. Products are delayed as large percentages of US capacity are offline- Ethylene 65%, Propylene Oxide 49%, Ethylene Glycol 89%, and etc.

This historic winter storm in the Gulf Coast has further exacerbated an already tight situation on Propylene Oxide and derivatives- see: Rising Propylene Shifts Market for IPA, Other Chemicals. The further impact of the storms is likely to be massive on a market already at 10-year-highs, and could take many weeks to resolve.

For questions on how this will affect your chemical supply and/or price, reach out to a sales representative.

Rising Propylene Shifts Market for IPA, Other Chemicals

February 10, 2021

The US Isopropyl Alcohol market has been a sideshow of its own against the backdrop of the COVID-19 pandemic. Commonly used for sanitization, IPA’s initial extraordinary price leap left market players staggered. Then, just as suddenly, a dramatic slide as the need was met, that brought pricing nearly back to pre-pandemic levels. Where will it end? What will it do next?

Since there are several ways to make Isopropyl Alcohol, factors that affect the US IPA market are numerous and varied… hence the wild ride! Changes in prices of feedstock materials (i.e. crude, propylene), planned and unplanned plant shutdowns, and of course, the supply and demand shifts caused by the pandemic all can have repercussions in the market.

IPA prices hit their lowest point since the start of the pandemic in the last weeks of 2020 (essentially returning to pre-pandemic levels). Since then, prices have bounced up again, on a rapidly upward trajectory. This time the increase is caused by the rising cost of feedstock propylene. Overall, propylene has nearly tripled in cost over the past ten months, and continues to rise steadily. Propylene is a derivative of crude oil, which has risen substantially in the past few weeks especially following the vaccine announcement. Additionally, it is a by-product of gasoline production, constraining supply due to lack of demand for fuel. Other market factors like planned outages for maintenance are expected to tighten propylene supply for the first half of the year, and to top things off, demand for propylene remains strong for packaging and many other derivatives.

Multiple increases have been tabled by producers, and are taking effect. Also affected by the rising cost of propylene? P-Series Glycol Ethers, Propylene Glycol, and Acetone.

What’s next? Chemical markets are very volatile right now. While IPA prices are certainly on an upward climb, we don’t expect to see the dizzying high prices we saw last spring. And although demand for IPA remains steady and strong, we don’t foresee the dramatic shortness of supply again, either.

At CORECHEM we continue to monitor the situation. For questions about how this may affect your chemical supply/price, get in touch with a sales representative. We look forward to working with you!

Hydrochloric Acid Makes a Comeback

December 1, 2020

For the past eight months, the US Hydrochloric Acid market has been plagued by soft demand, plentiful supply, and 4-year-low prices. Now, with the return of cooler temperatures, the market has shifted.

Hydrochloric Acid is a corrosive mineral acid, and one of the cheapest and most widely used commodity chemicals due to its high versatility. It may be produced intentionally (i.e. as a part of the chlor-alkali process, “on-purpose acid”) or as a by-product of another product. Both on-purpose acid and by-product acid have had supply outages in recent weeks. This large reduction in supply has caught up with and finally overtaken the softened demand condition existing in the market, leading to price increases and even supply issues for some marketers.

What kind of supply outages? A little bit of everything actually! Multiple producers had unplanned outages due to hurricanes. One major producer had to declare force majeure. Several by-product producers had planned shutdowns for plant maintenance. And Chlorine, a pre-cursor to Hydrochloric in the chlor-alkali process, has become tight. Since there are many outlets for chlorine, it makes sense for a chlor-alkali producer to shift production away from less profitable Hydrochloric Acid and divert the same chlorine molecule to more profitable applications such as plastics. PPE and other downstream derivatives continue to command higher prices due to overall stronger demand. Essentially, the low market price of Hydrochloric Acid led to producers not being able to cover costs of producing it, and therefore has become unsustainable.

While these events may impact your Hydrochloric Acid price, CORECHEM does not foresee supply issues. With further questions about how the market shift may affect you, reach out to a sales representative today.

Plant Issues Cause Propylene Glycol Hike

October 29, 2020

Earlier this month, a leak developed in a Propylene Oxide refining column at LyondellBasell. Force Majeure has been declared by LyondellBasell on all Propylene Oxide derivatives as they have been forced to significantly cut production as a result. As Propylene Oxide is a precursor to Propylene Glycol, this plant issue has had immediate impact to Propylene Glycol.

LyondellBasell is one of just a handful of US Propylene Glycol manufacturers, and a large and key part of PG supply in the US. The situation could be several weeks before back-to-normal. In the meantime, Lyondell’s customers are on 70% allocation, and increases are taking effect.

For further questions about how this may effect your Propylene Glycol supply and/or price, reach out to your sales representative today.

Acetone Enjoys Pandemic Popularity

July 1, 2020

Pandemic-related products are all receiving a tremendous amount of popularity right now, for obvious reasons. Who knew that Acetone is an essential ingredient for several of them?

That’s right. Hand sanitizer, face shields, and protective barriers all require this ketone solvent for production.

“Hand sanitizer made with Acetone??!!??”

No, Acetone is not a disinfectant and is not used as the active ingredient in any sanitizer! However, hand sanitizer is commonly made using Isopropyl or Ethyl Alcohol as the active ingredient. One of the 3 ways of manufacturing Isopropyl Alcohol is the catalytic hydrogenation of Acetone.

Another popular product right now is plastic, used for making face shields and protective barriers. MMA (Methyl Methacrylate) and other acrylics are commonly used to make these plastic products. According to IHS Markit, Methyl Methacrylate is the second largest end use for Acetone in the world.

Overall, the COVID-19 pandemic has resulted in a significant uptick in demand for Acetone, efficiently using up years of a supply glut in the U.S. Acetone market. (See Acetone Glut Likely to Last).

This is not the only effect COVID-19 has had on the Acetone market. In addition to creating noticeably heavier demand, Coronavirus has also had a hand in reducing Acetone production.

A co-product of Phenol, Acetone plants do not run only to meet Acetone demand. They primarily run to meet Phenol demand. Prior to the pandemic, Phenol/Acetone producers were pressing to meet high demand for Phenol. Now, Phenol demand has plunged amidst the COVID-19 economic slump. Major Phenol uses include plywood and oriented strand board (OSB) used in construction, which has taken a significant hit. Accordingly, plants have scaled back production in response to the decreased Phenol demand.

The net result? The U.S. Acetone market is no longer in an oversupply situation, and prices are on the rise. Some producers find themselves unable to fulfill all their contractual demands. On the positive side… market prognosticators view this as a situation that could ease in the coming months, as supply meets demand for COVID-related products and construction demand picks up.

With further questions about the U.S. Acetone market, and how this may affect you, reach out to your CORECHEM sales representative.

Wholesale IPA Prices Soften Dramatically

June 4, 2020

Notice to Isopropyl Alcohol Customers:

In an ongoing effort to keep our customers informed, we are pleased to share that wholesale prices for Isopropyl Alcohol 99% have steadily softened over the past few weeks and recent supply/demand changes have only increased the rate of change. While we are making every effort to inform our customers of exact price changes in a timely fashion, we are also currently receiving an unprecedented volume of new quote requests. If you have not yet heard from your account manager and would like to discuss current pricing for Isopropyl Alcohol, please don’t hesitate to let us know. We will ensure your account manager follows up with you promptly.

Sodium Hydroxide Market Heats Up

May 12, 2020

As summer nears, the Sodium Hydroxide (Caustic) market is heating up.

For three consecutive months, producers have tabled increases, and they appear to be sticking.

Here’s how the COVID-19 virus led to a domino effect for Sodium Hydroxide prices… and how the dominoes fell.

Amid the outbreak of the deadly COVID-19 virus, governments worldwide order lockdowns, business closures, and other drastic measures to slow the spread of the disease. Quickly, the world finds itself in an economic downturn.
Construction projects (i.e. new home construction) and the automotive industry are particularly vulnerable in a downturn, and are significantly affected. The automotive industry virtually shut down worldwide. New home construction saw it’s largest monthly decline in decades.
Construction and automotive industries are both major consumers of PVC plastics. Suddenly, demand for PVC is down 30-40%.
PVC is one of the largest consumers of Chlorine, and essentially drives Chlorine production. Although Chlorine is also used to make Bleach, and demand for disinfectants is high, the significant reduction in demand for PVC has overshadowed the increased demand for Bleach. (Bleach is only one small outlet for Chlorine.)
With 30% less Chlorine demand worldwide, Chlor-Alkali plants cut operating rates to 70%. With Sodium Hydroxide being a beneficial co-product of Chlorine production, it is now in shorter supply.
Demand for Sodium Hydroxide is more stable than Chlorine, and has not taken such a hit. Certain markets for Sodium Hydroxide, especially pulp & paper, are in great demand (think toilet paper, packaging for online sales).
With supply dropping more than demand drops, Sodium Hydroxide tightens. Increases from producers, rolled out for three consecutive months, are noticeable. Sodium Hydroxide is widely on allocation.

With questions about your Sodium Hydroxide supply/price, feel free to reach out to your Sales Representative. The team at CORECHEM is here to support our customers during this unprecedented time, and look forward to hearing from you!

US Oil Market Freakishly Trades Negative

April 23, 2020

This week saw a first for the oil industry.

Already trading at historically low prices, on Monday the WTI plunged to negative numbers and traded at -40/barrel. Fortunately, the next day saw a return to positive, albeit pitiful, numbers.

How can this be possible?

COVID-19 lockdowns have caused a sharp decline in oil demand, and are the single biggest contributor to the current oil crisis in the US. As a significant portion of the country stays at home in compliance with government regulations, cars -and airplanes- are parked. Most airline carriers are down 35 – 65%. However, oil is still coming out of the ground, and oil storage capacity has become increasingly scarce.

WTI futures contracts for May 2020 delivery were set to expire on April 21. This is why, on April 20, market participants that were unable to take physical delivery of product at expiration, or find a buyer for the contract, were led to pay to exit the contract.

Is negative the new normal?

While it is certainly possible that oil should trade negative again, it is unlikely to become the new normal. Presuming the lockdowns will lift in the coming weeks, demand is expected to increase and oil will once again be worth something. How fast and how strong the comeback will be remains to be seen.

Although there hasn’t been an immediate impact to downstream chemical markets, CORECHEM is continuing to monitor the situation as it develops. Certain chemicals that would normally follow the price slump in crude are likely to be propped up by high demand due to the COVID-19 pandemic. On the flip side, the pandemic has caused large portions of the economy to essentially ‘dry up’, and chemicals primarily used in these areas are experiencing the same shortage of storage space as crude. It is possible that chemicals will see both unprecedented highs, and all-time lows, in the coming months.

To discuss any questions or concerns about how this may affect your company, please feel free to get in touch with your sales representative.

COVID-19’s Impact On Chemical Supply Chains

April 8, 2020

The global COVID-19 pandemic has resulted in significant impact on chemical supply chains. Here we take a look at some of the chemicals that have been affected:

Isopropyl Alcohol (Isopropanol)

Sanitization products such as Isopropyl Alcohol have experienced skyrocketing demand. Unfortunately, manufacturers are simultaneously dealing with problems that are preventing them from supplying at full capacity. While two US producers are experiencing production issues, another is having trouble with raw material Acetone supply. A fourth US producer is scheduled to restart production of IPA, but this material will take a few weeks to come online. Meeting this unprecedented demand is proving to be a challenge, and prices have increased sharply.

A concerning trend has arisen in the IPA market in these unusual circumstances. IPA is in some cases passing through the hands of many distributors before it is finally delivered to the end user. At CORECHEM, our goal is to maximize the speed of product to the end user.

Ethyl Alcohol (Ethanol)

The Ethanol market essentially functions as two separate markets- Fuel Ethanol and Chemical, Food, and Pharmaceutical Grade Ethanol (Ethanol). These two markets are currently experiencing opposite extremes.

Most Ethanol plant startups in recent years have been tooled for Fuel Ethanol, creating an oversupply situation in the Fuel Ethanol market. Now, significantly reduced demand for fuel is compounding the oversupply problem.

Ethanol used for sanitization is experiencing record high demand. Prior to the COVID-19 crisis, Ethanol supply / demand was balanced. Now, prices are rising and supply is tight. Unfortunately, it is not easy for a Fuel Ethanol plant to switch over to creating Ethanol for other purposes.

Acetone

After years of a supply glut, the US Acetone market is tightening up. Acetone is a raw material used to produce Isopropyl Alcohol, now in high demand. Also, anti-dumping duty determinations have been finalized on Acetone being imported from five countries, resulting in imports from these countries stopping in November 2019.

Glycerin

Glycerin, a common ingredient in hand sanitizers and hand soaps, is also experiencing supply constraints and increased demand. Glycerin is a co-product of bio-diesel fuel. Diesel fuel has experienced a significant decrease in demand, due to reduced travel and an overall slowed economy. As a result of less bio-diesel fuel being produced, less Glycerin is being produced. Also, fewer imports are entering the the U.S. market. Price increases are taking effect, and expected to continue for some time.

Medium-Chain Triglycerides (MCTs)

Medium-Chain Triglycerides (MCT’s) is another ingredient in hand sanitizers and hand soaps, and is experiencing significantly increased demand. Overseas plants that produce MCT’s have been shut down for employee safety, resulting in supply constraints.

Sodium Hypochlorite (Bleach)

Although Sodium Hypochlorite is experiencing increased demand due to usage as a disinfectant, reduced demand in other market sectors, such as downstream plastics, may more than offset the increase. CORECHEM continues to monitor the Chlor Alkali market (Sodium Hypochlorite and co-product Sodium Hydroxide) for noticeable supply / demand shifts.

Reach out to your CORECHEM sales representative to further discuss how these or other chemicals may have been impacted by the COVID-19 crisis.

How Will Coronavirus Affect Chemicals?

February 7, 2020

China, a major player in global economies, is in the throes of health crisis- Coronavirus. As they strive to contain the virus, the government has taken measures such as extending the Chinese Lunar New Year to keep people away from workplaces, and imposing travel bans that have left millions in lockdown. Millions more cautious and sensible citizens are just staying home.

Here are some of the ways the crisis is affecting chemical markets:

Production Offline: Chemical production plants are offline, due to the government directive to extend the Lunar New Year break.
Demand for Chemicals: Employees that use chemicals at manufacturing plants aren’t at work either. This is reducing overall demand for chemicals.
Reduced Feedstock: Oil refineries are cutting back, which reduces the feedstock for petrochemical plants.
Rising Inventory: Storage warehouses are full, so plants are cutting production.
Shipping & Receiving: Due to travel restrictions, normal shipping and receiving of materials is hindered.
Fuel Demand: With significantly reduced travel, demand for fuel is down. Oil prices are falling.
Missing Employees: Production in plants in China may be reliant on migrant workers, who are hindered from getting to work due to travel bans.
Demand for Hygiene Products: Increased usage of household cleaners, disinfectants, and hygiene products has increased the demand for chemicals used in these products.
Overall Economic Activity Down: Holiday spending in China was much lower this year than normal.

It remains to be seen what the long term impact of this will be on chemical markets. Regardless, the supply chain team at CORECHEM is committed to minimizing the impact of the crisis for our customers by multi-sourcing our product offerings. Reach out to your sales representative for further questions you may have about how the Coronavirus crisis could affect you.