Market Updates - CORECHEM Inc.

Propylene Glycol Sees Relief But Still Tight

April 28, 2022

A softening in spot prices and increased availability for Propylene Glycol was welcome news earlier this year. Despite this, tightness of supply is still at hand in the U.S. market, and is expected to last at least through 2022.

Propylene Glycol (PG) is a downstream product of either crude oil (crude-derived Propylene > Propylene Oxide) or crude glycerin. Supply issues for both crude oil-based and glycerin-based Propylene Glycol are ongoing. Major producer Indorama has had a breakdown on a Propylene Oxide unit on April 15, which has resulted in a Force Majeure declaration from them as they are temporarily unable to supply. The higher price of crude oil, and the higher demand for propylene for other end uses such as plastic, is also affecting crude-derived Propylene Glycol. Meanwhile, there has also been a lack of availability of glycerin for bio-based Propylene Glycol. Soaring demand for soy for higher-value applications has impacted the availability as a common feedstock for crude glycerin. More recently, a ban of palm oil exports by Indonesia has suddenly restricted the global supply. Indonesia is the world’s largest exporter of palm oil, and palm oil is another major source for glycerin production.

Over the last few months, we have seen some stabilizing of spot pricing and modest increases in contract pricing. Any low prices in the market are primarily imported material, with limited availability due to global logistical issues.

Some relief for Propylene Glycol supply may not be too far off, however. Producer LyondellBasell is scheduled to bring a new PO plant online in December 2022 with the ability to produce 1 billion/lb/year of Propylene Oxide. Hopefully, this additional capacity will help alleviate tight PG supply in the U.S.

With questions about how these shifts in the Propylene Glycol market may affect your PG supply or price, reach out to a representative.

Plant Outages Plague Sodium Hydroxide

April 21, 2022

Unplanned and planned plant outages have been plaguing the Sodium Hydroxide market. Most recently, disasters at two Chlor-alkali producers are causing ripples.

A chlorine leak and fire in a Plaquemine, LA plant did not result in any injuries but has disrupted production at a major Chlor-alkali producer. They have declared Force Majeure as of today.

Another producer plant in Baytown, TX had a major power outage that has caused substantial damage. They have subsequently declared Force Majeure and issued price increases.

For more information on how this may affect your Sodium Hydroxide supply or price, reach out to a representative.

Plugging the Gap: Crude, Chemicals, and the Ukraine Conflict

March 30, 2022

The conflict in Ukraine is heavily impacting both oil and downstream chemicals. Here is the current situation and outlook, plus all of the chemical increase announcements we’ve seen so far.

Crude Oil (situation/outlook):

Russia, one of the top three oil producers in the world, has been supplying about 10% of the global oil supply. Prior to the conflict in Ukraine, the total volume of oil supplied by Russia was 2.3 million barrels/day to Europe and 2.5 million barrels/day to the rest of the world. The oil market was already tight, with prices just under $100/barrel. The conflict in Ukraine began just over a month ago, on February 24. Since that time, a number of countries and companies have decided to stop buying from Russia. (So far, the EU has not banned Russian oil due to concerns on the impact to their economy.) Russian oil exports are down by 1/3. This has led to a major shortfall of oil on a global scale, and further price increases (although oil prices edged lower last week due to the EU decision).

In the short term, some demand pressure is being relieved by China. China is the world’s largest importer of oil, and has recently experienced a spike in COVID cases. This is expected to reduce demand by about 400,000 barrels/day in April compared to February. However, this nowhere near makes up for the total outage, and market prognosticators believe that increased seasonal demand this summer will push prices back up over $120/barrel.

How will the world do without Russian oil?

There are several places the oil shortfall could be made up, but only one option that seems to hold potential at present. OPEC+ has increased their quotas, but in reality are still underproducing on them. U.S. is still producing around 11.5 million barrels/day, and production increases have been minimal. This leaves Iran as the potential source for plugging the gap left by Russia. IF a nuclear deal is reached with Iran, this would allow them to increase oil production by potentially 1.3 million barrels/day. For the time being, expect oil prices to remain elevated.

It is expected that by next winter, higher costs, higher interest rates, and higher inflation will lead to less demand for oil.

Market prognosticators believe that even if the conflict ends tomorrow, all will not immediately go back to normal. Western countries aren’t likely to immediately remove sanctions against Russia, and are likely to continue to avoid Russian oil as much as feasibly possible.

Petrochemicals (situation/outlook):

Russia’s contributions directly to the global chemical markets are minimal. Their largest chemical export is Methanol, with a total contribution of just 3% of the global supply. It may take some time for trade patterns to shift, and cause some problems in the short-term, but the world can make up for the loss of Russian chemicals.

Here are the chemical increase announcements we’ve seen so far:

The Ukraine Crisis & U.S. Manufacturers

March 8, 2022

The crisis in Ukraine is having an impact on the U.S. economy in many different ways. Learn more about the potential effects to U.S. manufacturers from this insightful blog published by IndustryNet:

The Potential Impact of the Ukraine Crisis on U.S. Manufacturers

Sodium Hypochlorite Contends with Chlorine Challenges

February 28, 2022

Bleach (also known as Sodium Hypochlorite) is made from a pale, yellow-green gas known as Chlorine. This gas is created during the Chlor-alkali process, as a “co-product” of Sodium Hydroxide and Hydrogen gas.

Although the word ‘Chlorine’ may immediately make you think of the notorious ‘pool smell’, Bleach is not the only end-use for the Chlorine molecule. Chlorine is also used to create at least a couple of dozen other products, including PVC, vinyl, resins, solvents, paint additives & herbicides. These other end-use products are in high demand, and in many cases produce a higher net return than Sodium Hypochlorite; producers can make more money off of them. In fact, Bleach is now beginning to be seen as a product that takes the Chlorine molecule away from other higher-value end-use applications.

Besides all of the internal competition for Chlorine, the Chlor-Alkali plants that produce Chlorine and Caustic Soda haven’t been running at full capacity. Chlor-Alkali plants and their investors have come to see that rationalizing capacity has helped to restore what has been considered lackluster margins for a number of years. As a result, we have seen multiple plants mothballed over the past couple of years, and the remaining plants are often being run short of full capacity.

Since there is less of the raw material Chlorine in the market, and many higher-value end-uses for the Chlorine that IS available, the price of Chlorine has shot up by very large increments (approx. 350%). The current challenge in the Chlorine market is making it hard for producers to commit to firm pricing for any length of time. It is also leading to the start-up of some mini salt-to-bleach plants (like a mini Chlor-alkali plant) here & there. It will be interesting to see if these new plants are able to add noticeable capacity and any real competition in the market. Another factor that could change the market, that is worth keeping an eye on, is an increase in import Caustic Soda. This could lead to a need to further reduce operating rates and tighten Chlorine supply even further.

In the meantime, prices for Sodium Hypochlorite are widely on the rise. Not surprisingly, other issues with logistics, like truck driver shortages, aren’t helping. With further questions on the Sodium Hypochlorite market, reach out to a representative.

Sulfuric Acid Struggles with Persistent Sulfur Shortage

February 8, 2022

Sulfuric Acid is a very important commodity chemical. America, the top chemical producer in the world, produces more Sulfuric Acid than any other chemical. Interestingly, we have found that the price of Sulfuric Acid also serves as a pretty good economic barometer, often revealing the overall state of a country’s economy. Sulfuric Acid may be produced “on-purpose”, by burning sulfur, or as a by-product of smelters.

In the past several months, the price of Sulfuric Acid has increased significantly, driven primarily by sizeable increases in the price of elemental sulfur due to shortness of supply. This lack of supply originated during the economic downturn at the beginning of the pandemic. While sulfur does occur in nature, today it is produced as a by-product when refining crude oil. Since demand for fuel was down at the start of the pandemic, refineries turned down their production and processed less crude oil. There was no significant diminishment in demand for sulfur, so the supply became short. Now, sulfur supply is increasing but has not caught up to demand, so there is less burner acid (on-purpose acid) available in the market. The lack in sulfur has resulted in at least one plant shut down.

The other notable factor driving up prices for Sulfuric Acid is increased demand for acid. For instance, demand for copper has increased for use in batteries for electric cars. This new, emerging market is expected to grow; thus increasing overall demand for Sulfuric on a long-term basis. Additionally, Sulfuric Acid is used in lead-acid storage batteries in solar farms, a rapidly growing energy source.

Other factors are affecting the market as well. The high corrosivity of acid means that Sulfuric Acid plants are subject to regular maintenance, as they are taken down and rebuilt regularly. This year, many turnarounds are planned for U.S. plants. Additionally, the past year has seen higher transport costs. In addition to the higher prices in the Sulfuric Acid market, the combination of factors means there is a possibility that Sulfuric could also experience some supply issues in the near future.

With questions about your Sulfuric Acid supply and/or price, reach out to a representative.

Potassium Hydroxide Gets a Boost From Ag

January 12, 2022

Potassium Hydroxide is derived from Potassium Chloride, one of the most widely applied fertilizers in the U.S. Agriculture industry.

Originally born in the 1600’s with the Native Americans and the (starving) Pilgrims in Jamestown, the Agriculture industry has always been critical to keep America running. However, it wasn’t until the 1900’s, when the fundamentals of plant nutrition began to be better understood, that the use of chemical fertilizers became common. Today, the Potassium fertilizer market is projected to reach USD $26.87 billion by the end of this year.

Potassium is a critical nutrient for plants. Potassium Chloride, known as KCL, and Potassium Hydroxide, known as KOH, are both added directly to the soil and are used in the production of many types of chemical fertilizers. 2021 was a good year for supplementing potassium in soil. Consequently, both Potassium products have been in heavy demand throughout the past year for use in agriculture fertilizer chemicals. This healthy demand has resulted in rising prices. In addition to strong demand, Potassium Chloride has also experienced supply issues, such as the closure of a Potassium Chloride salt mine by one producer much earlier than expected. The issues have led Potassium Chloride to more than triple in cost over the past year.

There have been other factors also contributing to the price increases seen in the Potassium Hydroxide market. Notably, there has been a lack in imported product. This has slowly been easing as the supply chain problems have eased. The US relies on imports of Potassium Hydroxide, as there is currently only one domestic producer for dry KOH. Also, two out of four domestic liquid KOH producers have experienced plant issues; one due to plant upgrades, the other due to Hurricane Ida. The Force Majeure that was declared due to Hurricane Ida has since been lifted. Natural gas and energy costs, as well as rail and freight costs, have also increased.

Recently, all domestic producers of Potassium Hydroxide have announced increases. For more information in the Potassium Hydroxide market, reach out to a sales representative.

Hurricane Ida Another Setback for Supply Chains, But…

September 16, 2021

…On a positive note, Ida was less devastating than the winter storms Uri & Viola last February.

(When supply chains have as many problems as they’ve had this year, yeah, we’re looking for the bright side!!)

It’s been a rough year for supply chains. Most recently, Hurricane Ida, a dangerous and major hurricane, made landfall in Louisiana on August 29. Ida caused widespread power outages, flooding and damage, including to many chemical production facilities. Not surprisingly, this has exacerbated the issues chemical supply chains were already facing. In addition to these primary issues, chemical plants have also been dealing with issues such as problems getting a consistent and reliable supply of feedstock materials since the storm. Although many plants experienced outages lasting weeks, the overall effect of the storm was less devastating than that of the winter storms Uri & Viola earlier this year.

Here we take a look at the effect Hurricane Ida had on some of the chemicals that were affected by the storm:

Chlor-Alkali (Sodium Hydroxide/Sodium Hypochlorite): Ida had significant impact to the chlor-alkali market, and numerous producers have declared Force Majeure following the storm. These producers had plants in the direct path of the storm, and shut down prior to the storm. Now the idled plants are waiting for raw materials and repairs. This has caused noticeable tightness in the Sodium Hydroxide market.

Isopropyl Alcohol (IPA): While we have seen some softening in the Isopropyl Alcohol market in recent months, Ida shut down 35% of capacity and appears to have halted the sliding trend.

Glycol Ethers: Glycol Ethers have been affected, as 23% of capacity went offline.

Potassium Hydroxide: The largest liquid Potassium Hydroxide plant in the world is in Louisiana and still not running due to power outage. After shutting down two days prior to Ida, it is expected to be online again soon.

Ethylene Glycol: Approximately 10% of capacity is offline due to Ida. Additionally, Ida affected nearly 60% of capacity for feedstock Ethylene Oxide. Ethylene Glycol supply has been short for most of 2021. While there has been considerable effort to rebuild inventories this year, this now likely won’t be possible before 2022.

In addition to plant closures, Ida has impacted logistics on other key commodities as well as many downstream chemical markets such as paints and coatings, plastics, and etc.

For more information about Hurricane Ida’s affect on your chemical supply, speak to a representative.

Acetic Acid Remains Tight After Deadly Chemical Leak

August 31, 2021

Acetic Acid and derivatives have been dogged by persistent short supply since the unexpected freeze up along the Gulf Coast last February. Force Majeures have dragged on for months, and some domestic producers are still on Force Majeure.

It was hoped that the challenges would begin to ease by the third quarter of 2021. Unfortunately, there have been further production issues in the meantime. One problem producers have faced is an inability to obtain sufficient feedstock supply. Then, on July 27, an Acetic Acid leak at LyondellBasell tragically resulted in the death of two people, as well as burns and injuries to several more. The plant was already down for planned maintenance, and the investigation of the incident prolonged the outage. This incident dashes hopes for any easing of supply constraints for Acetic Acid in the short term. Market prognosticators now expect Acetic to remain tight throughout most or all of 2021.

The shortness of supply is also affecting international trade. Under normal circumstances, United States exports much more Acetic Acid than it imports, largely to Mexico, Europe and Brazil. Exports were just beginning to ramp up following the winter outage when the leak occurred. Now, as producers continue to be unable to keep up with domestic or export markets, these countries are turning to Asia to make up the lack.

The current situation with the Acetic Acid market is affecting downstream products, i.e. acetates, as well. The largest end use for Acetic Acid is Vinyl Acetate Monomer (VAM), which consumes 35% of all Acetic Acid produced globally. VAM is used to produce paints, coatings, adhesives, films, and etc. Other downstream products of Acetic Acid include: purified terephthalic acid (PTA), ethyl acetate, acetic anhydride, monochloroacetic acid and butyl acetates.

For questions about the current situation in the Acetic Acid market, and how this may affect you, speak to a sales representative.

U.S. Thirsty for Citric Acid Imports

August 18, 2021

It’s peak demand season for Citric Acid, and the U.S. is short on supply.

There are only four Citric Acid producers in North America, which have the ability to supply 60 – 65% of our total need. The remaining 35-40% is, under normal circumstances, primarily met with imported product from Thailand.

Due to several factors, imported product has become increasingly difficult to get. One of the largest Thailand producers of Citric Acid that has declared Force Majeure on Citric Acid is citing the following reasons:

The major shipping problems and astronomical container rates and fees currently affecting all overseas shipping, see our blog.
Lack of feedstock materials (also due to the pandemic).
Weaker exchange rates due to the unprecedented stimulus funding in the U.S.

Lack of imported product is the main reason for the shortness of supply. However, two U.S. producers are also having operational issues that are keeping them from supplying at full capacity, albeit temporarily. U.S. producers are also experiencing higher cost of raw materials and transportation.

At present, domestic producers are sold out weeks and months into the future, unable to fill the gap in the market and supply the shortfall. Prices are jumping up on a regular basis. How long will this last? One of the largest domestic producers has stated they do not foresee supply catching up with demand until 2023.

For your Citric Acid needs, reach out to a representative for current pricing and availability, or request a quote.