High Feedstock Costs Leads 2-Ethylhexanol Prices to Incline in the European Market

The market situation of 2-Ethylhexanol (2-EH) was recorded to have witnessed a bullish situation during January 2024, with prices 2-EH increasing by approximately 3% respectively across the German market. The prime reason for these increments in the prices of 2-EH is largely attributed to the undersupplied market situation of feedstock Propylene and increasing prices of upstream Crude Oil whose prices witnessed increments of approximately 30% and 2.7%, respectively. Supply conditions of feedstock Propylene remained tight across Germany as traders anticipated a high demand of feedstock for Polypropylene and Polymer industry and sought to restock inventories of Propylene amidst its low availability which compelled production costs of 2-EH to rise in the German market.

The low inventories of Propylene were majorly attributed to declaration of force majeure throughout the first half of January 2024 across various Propylene plants across the exporting US market owing to challenging weather conditions which resulted in diminished supplies of feedstock in the German market to manufacture 2-EH. Key Propylene plants across the US namely BASF SE, Dow Chemicals, ExxonMobil, INEOS, and Shell Chemicals LP, etc. continued to run at 51% of their active capacities coupled with worsening of situation at Red Sea resulting in inflation of Propylene prices into the German market which subsequently translated into higher production costs of 2-EH.

The undersupplied market of 2-EH was further evidenced by OQ Chemicals, a leading producer of 2-EH who increased prices of 2-EH by USD 90/MT across Europe, which came into effect from January 1, 2024.

In terms of demand, the demand for 2-EH from the downstream plasticizer and paints and coating industry was recorded to be moderate at best as the construction industry across Germany and the Eurozone was continued to remain in retrenchment. The sector continuing to show pessimistic outlook with a combination of high interest rates and market uncertainty further casting a negative outlook for the European 2-EH market. Building companies registered a significant drop in new orders, employment and purchasing activity and business expectations remained historically low. The housebuilding segment of the construction sector continued to remain a drag with commercial building and civil engineering activities also witnessing significant contractions. Construction businesses reduced workforce levels and buying activities in December due to lower workloads further slowing demand of 2-EH from the paint and coating industry.

Overall, the German market of 2-EH is expected to be driven by scarcity of feedstock Propylene and upstream Crude Oil and the worsening of situation at Suez Canal as the US and British government get involved in this geopolitical crisis.