Delving into Derivatives: Oxo Alcohols, Acrylates and SAP

In recent years and month, our petrochemical product experts have developed and launched several complementary services that are providing a more comprehensive in-depth analysis and insight of the short-term market developments for different propylene derivatives. This includes new Market Advisory Service offerings for two of the smaller end use segments - acrylic acid, which accounted for about 4 percent of the global propylene consumption in 2020, and the oxo alcohols (2-ethyl hexanol and butanols), which are estimated to have consumed about 7 percent of the global propylene production in 2020 when combined.

Understanding the oxo chemicals market requires an integrated view along the value chain from feedstocks (propylene) through intermediates, derivatives and different end use sectors. IHS Markit is offering expert analysis along the entire oxo chemicals value chain with its new Global Oxo Alcohols and Plasticizers Market Advisory Service to help accurately navigate the changing market dynamics. This new service not only provides monthly contract and spot pricing but also provides a strategic outlook with price forecasting, cost analysis, trade data and detailed operational analysis. Key products covered in the monthly market report include n-butanol (NBO), iso-butanol (IBO), 2-ethylhexanol (2-EH), dioctyl phthalate (DOP), dioctyl terephthalate (DOTP), and diisononyl phthalate (DINP).

The acrylic acid industry and the complete acrylic acid value chain, through acrylate esters and super absorbent polymers (SAP), continue to provide a challenging business environment for all participants. With the Global Acrylates and SAP Market Advisory Service, IHS Markit brings the benefit of its tried and tested methodology to this little understood business sector. This service not only includes regional price data, margin analysis, production capacities and economics, quarterly supply-demand balances, and import-export flows but also provides information about end-use demand and shipments, as well as plant and project news across the value chain. Key products covered in the monthly market report include glacial acrylic acid (GAA), butyl acrylate (BA), 2-ethyl hexyl acrylate (2-EHA), super absorbent polymers (SAP), methyl methacrylate (MMA), methyl acrylate (MA), and ethyl acrylate (EH).

Regional Cash Costs Developments

As part of the Global Oxo Alcohols and Plasticizers and the Global Acrylates and Super Absorbent Polymers services Market Advisory Services, comprehensive cost analysis is carried out and to give some insight into the various markets, a summary of the recent developments is presented. The global nature of these markets makes the developments between regions critical and both services seek to give a comprehensive view on the interplay between regions and the consequence for various markets.

The major cost element for acrylic acid and oxo alcohols (n-butanol, iso-butanol, 2-ethyl hexanol) lies with the regional differences in propylene, the main feedstock used in the production of this material, and energy costs. As such, the cost advantage of acrylic acid moves with the cost for propylene which often benefits U.S.-based producers. While there may be substitute materials available through the acrylates chain in the paints and coatings industry, this is not the case for the oxo alcohols or GAA through the SAP chain. Substitution in the coatings markets could potentially come from other non-propylene-based solvents systems or through the water-based coatings chain.

The attached chart shows a comparison of regional production cash costs for glacial acrylic acid and oxo alcohols as of late January 2021. We have established a cost profile that we believe to be generic for each region which represents the sum of raw materials, variable, and fixed costs excluding corporate overheads and depreciation. Additional in-depth analysis of these factors is also incorporated in our analysis.

Starting with glacial acrylic acid, the issue of feedstock availability continued to plague North American operators in January and drove prices ever higher. The surge in cash costs seen in recent months put tremendous downward pressure on margins and left producers with little recourse than to announce further price increases in January, with another increase likely to be seen in February. In Europe, the acrylic acid value chain has been marked by the tightening of feedstocks and intermediates. Prices for propylene are expected to increase further until the second quarter of 2021 when the spring turnaround season is starting and imports from the US will have vanished. In Asia, cash costs for acrylic acid declined slightly in January on weaker propylene which moved them closer to European levels. While North America still enjoyed a lower cost position in January, this advantage will likely disappear in spring and early summer of 2021 as the start-up of new derivative capacities will shift the supply demand balance to a tighter position.

Moving on to the oxo alcohol markets, cash costs in Northeast surged at the end of 2020 as market sentiment firmed due to rising prices for the feedstock propylene accompanied by a largely unchanged supply and demand situation. At the beginning of the new year, Asian propylene prices started their descent which has brought down cash cost levels while Europe and North America saw both prices and costs moving up. In 2020, European production cash costs for both 2-ethyl hexanol and n-butanol have been more competitive than usual on the global stage due to the low oil price environment. This has protected the European market from imports. On average, cash costs are still around $100/t below those in North America and almost 200 $/t below Asian costs which could potentially open the arbitrage between the regions again. However, the prompt international trade remains to be dominated by availability rather than price arbitrage.

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Global Acrylates and SAP
Global Oxo Alcohols and Plasticizers

The Chemical Market Advisory Services covers more than 30 chemical products, comprising of 5 main chemical and derivative families, Aromatics and Fibers, Inorganics, Olefins and Derivatives, Plastics and Polymers and Syngas.