Uses

Isopropanol (IPA) is used mainly as a low-cost solvent for industrial and consumer purposes. The most important downstream industries for the product include de-icers, paints and resins, pharmaceuticals, foods, inks, thinners for wood finishing and adhesives. Cosmetics and personal care products are also created using the cosmetic grade of IPA.

In addition, IPA is used in motor oils, as a solvent for oils and gums, to manufacture fishmeal concentrates, as a cleaning and drying agent in the creation of electronic parts and metals, and as a coupling agent and preservative. It is also used in the manufacture of acetone.

IPA’s use as a raw material for acetone production is declining, as acetone production as a by-product in phenol production has increased.

Supply/demand

The European IPA market has rebalanced in 2018 after being tight in mid-to-late 2017. IPA prices rose in mid-2017 after European producer Shell declared force majeure on chemical solvents at its Pernis, Netherlands, plant. Shell has the second largest IPA capacity of any European producer.

While the market remained relatively tight in August and September 2017 due to weather-related production issues in the US, there was a rapid normalisation from October onwards following Shell ending its force majeure and with an influx of competitively priced US imports.

The market has tightened slightly in early third quarter 2018 as a result of difficulties delivering in northwest Europe due to low Rhine river levels. Trade statistics also show a decrease in US exports to Belgium by more than a third year on year, suggesting that high US prices have made this product less attractive in Europe. Nameplate capacity in Europe will increase from mid-August 2018 onwards, as producer Novapex will expand its IPA capacity in France, although the percentage increase is only just under 2% of overall European capacity.

The overall demand picture in first-half 2018 was slightly less strong than in 2017 as a result of uncertainty created by new US tariffs and a slowdown in manufacturing compared to earlier in the year.

Demand in Europe also followed typical seasonal trends, with a dip in the summer and over the Christmas period.

Downstream usage has seen a typical decrease in August 2018 as a result of holidays taking place in Europe, particularly in southern countries such as Italy.

Prices

In line with the rebalancing of supply and demand, IPA spot prices trended downwards from late 2017 to early 2018. Shell’s force majeure on chemical solvents was lifted in late 2017, and as a consequence of this and an influx of cheap US IPA imports, spot prices fell by almost 23% between the end of September and early January and continued to trend downwards in the first quarter and early second quarter of 2018.

The European IPA market hit a balance point in late second quarter/early third quarter 2018 as price spreads reached their normal historical levels against feedstocks and US imports became less competitive.

The continued downward trend also began to reduce margins for European producers. As a result, spot prices slowly began to trend upwards again from early May, with technical grade prices increasing by almost 15% between the beginning of May and mid-August.

Technology

There are two main routes to producing IPA commercially. One method is based on the indirect hydration of refinery-grade propylene, which uses sulphuric acid to form isopropyl sulphate. This is then hydrolysed with steam to form sulphuric acid and IPA. The crude IPA is distilled to the desired purity.

Another route is the direct hydration of chemical grade (90+%) propylene, which avoids the need for sulphuric acid.

France’s Novapex uses a method of producing IPA involving the hydrogenation of acetone, which has similar cost-effectiveness.

Outlook

The short-term outlook for European IPA is stable-to-firm, with demand expected to rebound in September following the lull period in August and low water levels also complicating deliveries along the River Rhine. These logistical issues contributed to spot price increases in mid-August.

European nameplate IPA capacity will rise slightly in 2018 with Novapex expanding its plant in France, but this is not a large enough expansion to seriously impact market balance. There are no other major domestic capacity changes scheduled or expected in the near future with the European market expected remain structurally balanced in terms of supply and demand.

The UK’s decision to exit the EU in early 2019 has increased uncertainty in the market and is predicted to lead to lower growth in certain sectors such as commercial construction and lower overseas investment. It is not clear what overall impact this will have, but this may have negative effects on UK solvent demand growth due to the uncertainty causing problems for downstream industries.