Demand is down and feedstock prices have dropped. But, though there are some reports that solvent prices are slightly lower this year, few buyers have seen a significant decrease in price tags.

Solvent prices had risen over the past year due to a combination of stiff feedstock and energy costs and overall higher demand. All three cost drivers have dropped slightly, but suppliers' efforts to improve margins are likely to prevent solvent product prices from falling dramatically any time soon.

Instead, buyers are seeing moderate industry-wide price escalations, such as Dow Chemical's 3¢-5¢/lb price increases for most oxygenated solvents implemented April 1.

Patricia Holahan, business manager for Oxo Products, Dow Chemical, Danbury, Conn., says solvent prices have gone as "low as they can go relative to the current cost structure." Hydrocarbon feedstocks and natural gas increases have outpaced industry margins, says another source.

Other supply-side price pressures exist as well. Paul Pignone, business manager, isopropanol and acetone derivatives at Dow Chemical, says regulations and consolidation "will continue to drive industry economics" in the near future. Freight costs also are higher, adds Holahan.

But while production costs remain elevated, critical feedstock crude oil prices are declining slightly. Houston-based PACE Consultants predicts West Texas Intermediate (WTI) prices will slip to $25.58/bbl by June, after reaching $29.49/bbl in February. Crude oil prices are expected to stay in the $25-$26/bbl range through summer.

But this erosion in crude oil prices won't show up in solvents pricing immediately as Dow's Pignone points out that producers' costs are still higher than levels they have seen historically.

Some buyers have begun to see prices soften, but relief hasn't been widespread. Purchasing's current solvents price index shows tags have stabilized this spring at levels significantly higher than in 2000.

Those who are obtaining lower prices are primarily high-volume users, according to one source. For example, a large solvents customer says that while the major chemical companies have announced price increases, he expects solvents pricing to follow the general economy "as long as feedstocks stay soft." He cites lower petrochemical prices are reducing the prices he's paying for solvent-based products, but says those sourcing smaller amounts of solvents don't have the leverage to avoid higher pricing.

Slipping demand in a number of markets accounts for recent stabilization among solvents prices. Increased orders for some solvents in 2000 had offset a long-term decline due to environmental concerns. This year, however, there are only scattered areas of growth.

Solvents demand is slackening this year as automotive and housing starts are down, says William Hough, vice president, marketing, at distributor ChemCentral, Bedford Park, Ill.

Allen Hagstrand, director of corporate purchasing, Benjamin Moore, Montvale, N.J., confirms there has been "softening in the coatings market," due to the reduction in finished goods demand. He expects 2001 to be flat for solvent use.

Though demand for solvents is lower this year in automotive and durable goods, Dow's Holahan says markets for pharmaceuticals, personal care and household cleaning products currently are unaffected by the downturn. Steve Risotto, president, Halogenated Solvents Industry Alliance (HSIA), adds that solvents demand may have "bottomed out." He notes applications that could use substitutions for solvents already have been identified, preventing further market reductions.

Market analysts at Cleveland-based Freedonia Group expect higher demand among only a few groups of solvents. For instance, decreased use of hydrocarbonated and chlorinated solvents will be offset by growth among alcohols, ethers and esters. The firm predicts the average price per pound will rise as lower-cost commodity solvents are replaced with specialty products.

Supply of solvents is adequate for the near future, say sources. No shortages are expected this year with demand continuing to be sluggish. Leadtimes will remain short through year-end.

Holahan says leadtimes are normal for existing business conditions and range from one to 14 days. Leadtimes continue to be "mode- and location-specific," depending on where the customer is in relation to distribution centers, she points out.

Overall, there are no immediate problems predicted for supply. However, ChemCentral's Hough says long-term tightening is possible because "the cost to produce solvents is exceeding the value of product."

Online sourcing continues, but one industry source says some suppliers are discouraging participation in real-time online bidding services because of negotiation that occurs after the non-binding, reverse-auction processes end.

Demand for solvents may be low, but environmental scrutiny continues to rise. HSIA 's Risotto says the California Air Resources Board has "a new set of VOC (volatile organic compounds) regulations," which will be phased in over the next two to three years. As a result, solvent suppliers are responding with "California-only" products, he says. Regional rules have driven development of compliant products, though Risotto says these solvents won't replace national offerings because performance is not identical to that of existing products.