Japanese 2-EH Market Stabilises Entering July 2024 Amidst Limited Demand

In the initial week of July 2024, the Japanese market for 2-Ethylhexanol (2-EH) exhibited stability, owing to a delicate balance between supply and demand. Prices of 2-EH experienced a downward trend month-on-month, declining by approximately 6% in June 2024. This decline was chiefly influenced by diminished demand from downstream sectors such as plasticizers and paints, largely attributed to a slowdown in Japan's construction industry.

On the supply side, the availability of 2-Ethylhexanol (2-EH) in Japan was abundant among local suppliers, with inventories simply not being consumed from the downstream industries. However, potential supply constraints were observed across the East Asian market for feedstock due to maintenance shutdowns at major propylene plants in South Korea and China. Notable facilities affected included Hyosung Corporation in Ulsan, South Korea, Jiutai Energy in Ordos, Inner Mongolia, and several others in China such as Baofeng Energy, Zhejiang Petroleum and Chemical (ZPC), and Zhong Tian He Chuang Energy. Moreover, imports of 2-EH from Taiwan and China faced limitations due to significantly increased freight charges across Asia. Shipping costs for a standard 40-foot container rose by 7% in the third week of June alone, representing a substantial 233% rise compared to the previous year.

Demand for 2-EH as a plasticizer and solvent in paints continued to be sluggish, exacerbated by a decline in construction activities across Japan. New construction starts decreased from 76,583 units in April to 65,882 units in May 2024, with further declines anticipated for June. Orders for public works also declined sharply from 3,950,150 yen in April to 1,577,178 yen in May 2024. A report by Japan's Internal Affairs Ministry highlighted a significant oversupply of over 9 million vacant homes nationwide, underscoring a pronounced slowdown in the construction sector. Moreover, demand conditions of 2-EH from the automotive sector were lacklustre, with new vehicle sales declining by 5% year-on-year to 373,599 units in June 2024, continuing a downward trajectory observed since the previous year's end. Additionally In the first half of 2024, the vehicle market declined 13% to 2,127,490 units after growing by 17% to 2,450,600 in the same period of last year with passenger vehicle sales declining by 12% to 1,800,077 units while truck sales dropped 19% to 322,205 units, keeping demand for 2-EH lower from the downstream plasticizer industry.

In summary, the 2-EH market in Japan during early July 2024 maintained stability in prices amidst a balanced supply-demand scenario. However, challenges persisted for 2-EH due to ongoing maintenance activities for feedstock at major production facilities and subdued demand from critical industrial sectors. The market's resilience was evident despite the pressures exerted by maintenance-related production constraints and economic downturns in key consuming sectors.