Market Updates - CORECHEM Inc.

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.

Saudi Arabia Attack: Global Crisis or Weekend Panic?

September 17, 2019

Last weekend, major Saudi Arabian oil processing facilities were attacked in an ongoing feud within the region. Drones and missiles, of disputed origin, shut down half of Saudi Arabia’s production capacity, or approximately 5% of the global daily supply.

How much of a disruption to crude oil supply and downstream chemical markets will this be?

That’s a good question.

Initially, the crude oil market was in shock. Oil prices spiked. Analysts predicted a recovery period of months, and the U.S. President authorized the use of the U.S. Strategic Petroleum Reserve if necessary.

Now, however, Saudi Arabian officials are saying that production is fully back online after the weekend attacks. Oil prices are dropping, and the U.S. President has stated that he does not think the use of America’s oil reserve will be necessary.

Regardless, the effect of this large scale disruption could potentially be felt for some time. Major chemical producers have announced increases on some organic chemicals. Here are just a few of the crude-derived chemicals that could potentially be affected:

Toluene
Xylene
Mineral Spirits
Hexane
Heptane
Isopars
Aromatic Solvents

With further questions about how this event may effect you, contact your CORECHEM Sales Representative today!

U.S. Becomes a Global Leader in Methanol Production

August 20, 2019

New Methanol plants continue to be fired up in the U.S., despite the oversupply seen in the domestic Methanol market. The global market, for use in applications such as chemicals, plastics, and fuel, is sparking increased export demand for Methanol, and the low cost of the raw material natural gas makes the U.S. the ideal production location.

The Gulf Coast is home to most of the country’s Methanol plants, due to ease of access to both raw materials and major consumers such as China. The largest production facility in the country, Natgasoline, opened there last summer, with two more plants slated to open on the Gulf by the end of 2020. Big Lake 1 and Yuhuang’s St. James 1 plant will increase total U.S. Methanol capacity by a whopping 45%. Major producer Methanex recently announced their decision to build a third Methanol plant, Geismar 3, to begin operations in 2022. This plant will be dedicated 100% to export Methanol. A Liberty One plant in Brazil was deconstructed, moved, reconstructed in West Virginia, and expects to begin production in early 2020.

With the Asia / China fuel market and MTO (Methanol To Olefins) considered a sure bet for Methanol demand, United States is becoming a global leader in Methanol production, and is fast becoming a net exporter of Methanol.

This significant new production capacity is fueling an oversupply situation in the United States. According to the Methanex price index, Methanol prices are currently at a near three year low, after peaking in November of 2018.

CORECHEM looks forward to supplying your Methanol needs! View our Methanol product offering here.

UPDATE: ITC Deer Park Terminal Resumes Operations

June 6, 2019

A fire at the ITC Deer Park terminal in mid-March affected both supply and price of several commodity chemicals. Following a weeks-long cleanup process, in which over 20 million gallons of oily water were removed from the water and tank farm, the docks at ITC were approved for use in the first week of May. In addition, rail, truck & pipeline activity has resumed.

The reopening of shipping operations at the ITC Deer Park facility, a major storage facility for petrochemicals near Houston, TX, is normalizing supply chains of commodity chemicals such as Isopropyl Alcohol (IPA) and Methyl Ethyl Ketone (MEK).

CORECHEM looks forward to supplying your company! Contact your sales representative with questions about how this may affect you.

U.S. Sodium Hydroxide Flows Into South America

June 4, 2019

U.S. exports of Sodium Hydroxide to Brazil have just increased exponentially. The crumbling Pinheiro neighborhood, and the world’s largest alumina refinery, are the reason why.

Petrochemical producer Braskem in Brazil has recently shut down salt mining operations following a governmental report citing the salt mines, combined with heavy rainfall, to be the cause of geological instability in the Pinheiro neighborhood.

Because salt is necessary for the production of Sodium Hydroxide, Braskem has subsequently declared force majeure and has begun importing product from the U.S. to fulfill contracts.

Another company in Brazil, aluminum producer Norsk Hydro, has begun importing a significant amount of additional Sodium Hydroxide from the U.S. A government-issued production embargo issued due to environmental concerns has recently been lifted. The Alunorte alumina refinery is allowed to run at full capacity after over a year of only being allowed to run at half capacity. Alumina production is one of the biggest consumers of Sodium Hydroxide in the world.

These additional significant exports to South America, combined with additional exports to Latin America, the Middle East and Asia (due to new alumina operations) are squeezing U.S. Sodium Hydroxide inventories. Domestic demand for Sodium Hydroxide is increasing as well. Meanwhile, several major U.S. producers have planned outages in the near future.

As a result of the shifts in the market, U.S. producers have announced increases. According to market prognosticators, there is a possibility that a portion of the increases could materialize in the third quarter. With questions about how this could affect you, reach out to your sales representative.

Tariff Hike Will Affect Chemicals

May 10, 2019

Last night, tariffs on 200 billion dollars worth of material imported from China increased from 10% to 25%.

The increase does include a number of commodity chemicals, and is likely to affect the global market. A few chemicals that could be potentially impacted are:

Sodium Hydroxide
Titanium Dioxide
Acetic Acid
Phosphates

For the complete list of items affected, see Tariff List-09.17.18.

CORECHEM continues to monitor the effect of the tariffs on commodity chemicals, and we have already taken steps necessary to minimize the impact on our customers.

Get in touch with your sales representative for questions about how this could affect you.

IPA On Hold While Houston Cleans Up

April 30, 2019

Acetone Glut Likely to Last

April 9, 2019

As China celebrates the Spring Festival mid-February, it is not uncommon for their inventory of petrochemicals, including Acetone, to reach an annual high. However, the inventories this year are staggering.

Acetone inventory in China is presently at a 100% increase over last year. Storage facilities have reached bursting point as they turn to smaller, infrequently used tanks to hold the overflow. Ships are delayed in unloading as they arrive in ports with limited to no storage capacity.

Only about 17% of the Acetone consumed in the U.S. is imported, and primarily it comes from Belgium, Korea, South Africa, and Spain. Regardless, the excess inventory in China does effect the global market.

U.S. Phenol/Acetone producers are currently seeking to meet the demand for Phenol, while limiting the oversupply of Acetone. Acetone is a by-product of Phenol. At present, the supply of Phenol is tight.

Demand for Acetone in the U.S. is weak, as domestic Methyl Methacrylate (MMA) producers have initiated shutdowns for various reasons. MMA production is one of the two highest consumers of Acetone.

Also affecting the U.S. Acetone market: In an anti-dumping suit filed by three U.S. producers, the U.S. International Trade Commission voted last week that the U.S. Acetone market is materially injured by reason of product imported from five countries allegedly being sold at less than fair value.

CORECHEM looks forward to supplying your Acetone needs!

Two Fires Fuel Uncertainty for Methyl Ethyl Ketone (MEK)

March 26, 2019

The residents of Houston, TX found themselves under a hazardous cloud last week as a major storage facility for Shell Chemicals, ITC Deer Park terminal, blazed.

Although only a few of the 242 tanks at ITC burned, and reports did not indicate that any of the tanks contained MEK, Shell Chemicals subsequently declared Force Majeure on MEK, citing the fact that all loading and shipping operations at the terminal had ceased.

Ironically, a Taiwanese producer, Tasco, has also recently declared Force Majeure on MEK following a fire that broke out in their control room and pipeline on February 28. The Tasco plant is expected to be down for six months, pending government approval of the rebuild.

The MEK market is expected to feel the effect of the fires. At present, there are less than ten manufacturers globally of Methyl Ethyl Ketone, with the majority being produced in China and Asia. No Methyl Ethyl Ketone is currently being produced in the United States.

Other factors are affecting the U.S. MEK market. Uncertainty surrounding tariffs on imported product is causing hesitancy with U.S. importers. Also, MEKP, a major consumer of MEK, is now being produced by Nouryon at a new facility in Pasadena, TX.

To discuss the possible effect of the fires on your MEK supply and/or price, contact your sales representative. CORECHEM is committed to minimizing the effect on our customers to the best of our ability.

Caustic Soda Update

December 18, 2018

Supply: Over the past few years, several factors have led to a global tightening of supply for Caustic Soda. In China, lackluster margins for co-product chlorine and new environmental regulations resulted in steady decline of availability, particularly for US imports. In Europe, the chlor-alkali sector committed in 2001 to phase out mercury-cell technology by 2020. This became legally binding when Mercury-cell production was declared outside of Best Available Techniques (BAT) in 2013, resulting in a mandate to close these facilities or convert to Membrane technology by December 2017.

For the latter part of 2018, supply has been stable to strong, with only a few scheduled plant turnarounds and short-term disruptions, such as terminal flooding in Wilmington, NC during Hurricane Florence in September. Operating rates, however, have dropped from the 90’s to the mid-80’s as seasonal demand for Chlorine decreases.

Although no new ground-up plants are currently planned for construction, there has been recent uptick in Asian production, as well as a plant expansion in the USA, see Shintech Announces New Integrated PVC Plant Investment of $1.49 Billion to Bolster PVC Business. Availability has also increased in the Asian and Middle Eastern markets.

Demand: On the demand side, there have been several changes recently. With the aforementioned issues in China and Europe, the USA has become a more viable and competitive global source for large consumers such as Alumina producers in South America and Australia. This has led to a steady increase in U.S. exports, to the point that the U.S. has become reliant on the export market. According to a recent ICIS report, the U.S. exports approximately 28% of current output. Latin America accounts for over half of U.S. Caustic Soda exports.

This new export market was drastically interrupted in October, when Hydro’s alumina refinery AluNorte in Brazil announced a full curtailment of operations to meet the demands of environmental authorities. This lead to an almost immediate backup in the U.S., as Alunorte accounted for a large percentage of exports. Alunorte was able to restart operations at 50% capacity, but in the meantime many Caustic Soda shipments were forced to be diverted elsewhere. AluNorte is expected to be back at 100% capacity sometime in early 2019, which is expected to balance out the current reserves.

Shift from Diaphragm Grade to Membrane Grade: An interesting twist to the market has been the steady shift in demand away from Diaphragm Grade and towards Membrane Grade product. This preference is due to the fact that Membrane contains less of the starting material, sodium chloride. The lower sodium chloride level reduces the rate of corrosion to costly equipment, particularly in paper mills, which accounts for one of the largest end-use markets. This shift has resulted in an increased availability of Diaphragm Grade, and a persistent tightness in availability of Caustic Soda Membrane Grade.

Pricing: While pricing steadily increased up until the middle of 2018, the market appears to have leveled off and starting softening in the fourth quarter of 2018. In addition, there is a growing disparity in the pricing of Membrane Grade vs. Diaphragm Grade, due to the shift in demand towards Membrane.

In spite of the recent softening, all of the major U.S. producers recently announced a $40/DST increase for all grades, citing lower operating rates and the anticipation of increased demand as AluNorte and other major consumers come back online. This increase is intended to go into effect in January 2019.

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