US 2-EH Market Diverges in Late June 2024, in Lieu of Subdued Demand Conditions

In the late June 2024, the US market for 2-Ethylhexanol (2-EH) experienced distinct trends between domestic and exporting market. Domestic prices saw a rise of about 1%, contrasting with stable export prices. This disparity was influenced by constrained domestic supplies as several US PDH plants underwent maintenance, limiting the availability of Propylene, a crucial feedstock. Consequently, Propylene prices surged by approximately 6%, driving up production costs for 2-EH.

A notable incident occurred when Enterprise Products Partners L.P. declared force majeure due to a power failure at its Mount Belvieu Propylene production site, which normally produces 62,500 MT of Propylene. This outage further affected 2-EH production across the USA. Concurrently, upstream Propane prices increased by about 1% as the seasonal demand approached, supporting production costs for 2-EH.

While domestic prices rose, export prices remained steady due to subdued demand, particularly from Asia where the construction sector faced financial strains. Japan reported a decline in new construction starts, dropping from 76,583 in April 2024 to 65,882 in May 2024, a decrease of approximately 14%. This downturn was exacerbated by labour shortages in Japan's construction industry, where the workforce declined by nearly 20% from 2022 to 2023, with 36% of the workforce aged 55 or older. This is particularly evidenced as according to a labour force survey by Japan’s International Affairs and Communications Ministry, the number of people working in the country’s construction industry has fallen by nearly 20% in 2023, from around 6.03 million in 2022 to just 4.83 million last year. This continued to lead to delays in and suspension of construction work with the most notable example being a two-year delay for Tokyo’s Edogawa Ward government’s new office building, leading to low consumption of 2-EH.

Global port congestion also reached an 18-month high, adding to unfavourable export conditions for 2-EH. In the domestic market, demand remained sluggish as home sales fell for the third consecutive month in May 2024. Sales of existing homes dropped 11.3% to an annual rate of 619,000 units, marking the lowest level since November and the largest percentage decline since September 2022. Sales were particularly weak in the Northeast and West regions, signalling subdued demand for 2-EH used in construction activities.

Overall, the 2-EH market in the US at the end of June 2024 reflected divergent trends between domestic price increases driven by supply constraints and export stability amid reduced global demand, especially from Asia's stressed construction sector.