Diverse markets provide moderate growth

By Staff -- Purchasing, 9/2/1999

In general, prices for alcohols are driven by natural-gas feedstock costs and supply and demand fundamentals. But it is important to remember that specific factors also affect the various markets.

For methanol, prices are near record lows, and significant new capacity is scheduled to come on stream in the fourth quarter of 1999. Buyers expect contract prices to soften to about 28¢/gal in the fourth quarter, according to Purchasing's monthly survey of chemical prices.

Tight ethylene supplies in early summer applied upward pressure to ethanol prices, (see ethanol price chart on page 32C1).

Butanol prices are currently stable at about 30¢/lb for contracts and spot tags. Buyers expect some price slippage through the first quarter of 2000 to 27¢/lb for contracts and 26¢/lb for spot tags.

Isopropyl alcohol prices have received a boost from propylene feedstocks, which have increased gradually since the first quarter. Buyers place current isopropanol contracts at about 30¢/lb.

Supply: ample

According to Chuck McSpadden, an analyst affiliated with The pace Consultants, Inc., a petrochemical market analysis firm located in Houston, Texas, domestic supplies of methanol have been augmented by readily available, cheap material produced overseas. "Consequently, operating rates for methanol are currently at about 60%," McSpadden says.

Methanex, Vancouver, Canada, recently completed construction on its new methanol production facility in Punta Arenas, Chile. The plant has an annual production capacity of 975,000 tonnes.

Demand: moderate growth

Most analysts predict overall growth at GDP levels; however, some individual segments within the alcohols industry have been targeted for growth.

"The use of alcohols in the production of derivative ketones, isopropylamines, and isopropyl esters is increasing at about 3% to 4% annually," says a Gulf Coast producer.

"Growth for isopropyl alcohol will be led by the acrylates market," says Rob Henske, an analyst with Cambridge, Mass.-based Arthur D. Little Consulting. "The North American market for acrylates is currently growing at about 5%/yr," he says.

Growth is also predicted for alcohols in the solvents market, especially for ethanolamines. A recent report by The Freedonia Group projects ethanolamine growth at 4.7%/yr to 2.5 billion lb by 2002, valued at $2 billion.

In the next year, environmental issues could have a dramatic effect on the methanol and ethanol fuel additives industries, as regulators decide whether to amend the Clean Air Act, which mandates the use of methyl tertiary butyl ether (mtbe) in gasoline reformulations.

If mtbe use is banned from U.S. gasoline, the result could be a substantial boom in ethanol and the development of ethyl tertiary butyl ether, or (etbe).

Markets: diverse

Alcohols are used in a wide variety of markets, including fuel additives, industrial intermediates, paints and coatings, synthetic lubricants, solvents, adhesives, plasticizers, surfactants, acidifiers, and neutralizers. Other end uses include pesticides and herbicides; perfumes and personal care products; industrial and home detergents, disinfectants and polishes, textiles, and food preservatives.