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.

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:

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!

Plant Issues Cause Propylene Glycol Hike

October 29, 2020

LyondellBasellEarlier 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.