Supply Disruptions and Rising Demand Drive MEK Prices in the USA Market

Texas (USA): Methyl Ethyl Ketone (MEK) prices have sustained an upward trajectory over the past two months in the USA's domestic market, creating a noteworthy buzz among consumers and industry experts alike. Widely used as a solvent in formulating paints and coatings, MEK's price surge is attributed to multifaceted factors impacting both the supply and demand dynamics. The bullish trend in MEK prices within the USA market is a result of several intertwined factors. Instances such as attacks in the Red Sea, a drought affecting the Panama Canal, and heightened demand from downstream sectors have collectively fueled the price spike. Additionally, temporary shutdowns of MEK production units in exporting nations like China for maintenance have contributed to a global supply squeeze, intensifying the upward pressure on MEK market prices.

A pivotal role in this supply disruption narrative is played by the Panama Canal drought and attacks on the Red Sea. These disruptions have forced carriers to reroute ships around the Cape of Good Hope, significantly increasing both time and costs for each voyage. The ongoing rebel attacks on vessels in the Red Sea and drought conditions limiting vessel transits through the Panama Canal have disrupted traffic and exacerbated supply challenges in the global MEK market. Moreover, adverse weather conditions, like freezing temperatures on the US Gulf Coast, had some impact on the petrochemical industry, although it managed to avoid catastrophic shutdowns experienced during Winter Storm Uri in February 2021.

Moreover, there has been an increase in demand from the paint and coating industry, impacting both the automotive and construction sectors and causing an upward shift in the price of Methyl Ethyl Ketone (MEK). December witnessed a substantial surge in sales within the automotive industry, exceeding figures from November by more than 14%. According to the U.S. Bureau of Labor Statistics, the construction industry saw a noteworthy addition of 17,000 net jobs in December, reflecting a year-over-year increase in employment by 2.5 percent. This overall growth resulted in the creation of 197,000 new jobs, underscoring the industry's resilience, driven partly by significant boosts in construction spending. Concurrently, the pricing dynamics of the feedstock Butanol experienced a decrease, influenced by a downturn observed in exporting nations.

Tracking the journey of MEK prices, it stood at USD 1185/MT CFR Texas in October, escalating to USD 1236/MT the following month, marking an increment of 4.3%. By December, MEK prices surged to USD 1344/MT, reflecting an 8.7% increase from the previous month. As of January 26, 2023, the price has reached USD 1590/MT.

In conclusion, based on the analysis, the price of MEK is expected to persist in its upward trend in the upcoming month. This projection is attributed to disruptions in logistics, increased insurance charges in shipments, and a limited inventory in the domestic market, all occurring amidst moderate demand from downstream industries.