Drought-Induced Panama Canal Disruption Sparks Sharp Rise in European Methyl Ethyl Ketone Prices

Natural gas is approximately five times more costly in Europe than in the United States. It's cheaper to purchase most of the petrochemical products in Texas and transport them across the Atlantic for further processing in the EU rather than producing them domestically. As a consequence of this practice by petrochemical companies, Europe is experiencing a decline in economic activity, a deterioration of the trade balance in chemical products, and, ultimately, the loss of jobs and energy security. Over the past month, specifically in November, the price of Methyl Ethyl Ketone has been consistently increasing, supported by rising costs of the feedstock acetone, while the demand for derivatives such as acetic acid remains moderately stable in the market.

This upward trend is attributed to elevated freight charges from the USA despite the relatively moderate demand for the product. Data from the purchasing managers' index suggests that the euro zone's construction and manufacturing sectors are continuously shrinking while inflation exceeds the set goals. Huntsman's Q3 results indicate a decline in sales volumes across all regions, mainly attributed to a slowdown in construction activities and a decrease in demand for agrochemicals, coatings, adhesives, fuel and lubricants, and other industrial markets. Methyl Ethyl Ketone is utilized as a high-quality solvent in adhesives, thinners, cleaning agents, printing inks, and surface coating applications. Industrially, Methyl Ethyl Ketone is highly demanded in pharmaceuticals and as an intermediate in the chemical industry.

The United States is the largest global exporter of refined petroleum products, including Methyl Ethyl Ketone. The west coast of South America has historically been a key destination, and the trade heavily relies on the Panama Canal for transportation. The length of alternative paths is more than double the original route. Since the Panama Canal Authority (ACP) started heavily restricting reservation slots at the beginning of November, waiting time for ships without reservations has increased — and spot rates for Medium-Range (MR) product tankers using the canal have skyrocketed to record highs.

Prices of Methyl Ethyl Ketone in the Netherlands continued to remain bullish since the first week of November 2023 after the Panama Canal situation happened. Multiple vendor inquiries revealed that the price of Methyl Ethyl ketone increased in the Netherlands. In the first week of November, the price of the Methyl Ethyl ketone was USD 1150/MT FD Rotterdam, which was 4.5% higher than the previous week. In the second and third weeks, the price of Methyl Ethyl Ketone increased 5.2% and 6.6%, respectively. In the fourth week, the price of Methyl Ethyl Ketone remained bullish, reaching USD 1350/MT FD Rotterdam, which was 4.6% higher than the previous week.

ChemAnalyst forecasts that the prices of Methyl Ethyl Ketone are expected to be bearish due to weakening demand across the globe. Methyl Ethyl Ketone price recovery is expected with a delay once the Panama Canal issue is resolved.