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VOLUME XXI
September 14, 2023
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September 14, 2021
Europe BDO market to be defined by self-sufficiency, tightness in 2022
Author: Nick Cleeve
2021/09/07
LONDON (ICIS)–The European butanediol (BDO) market has changed radically during 2021, with domestic supply of material becoming much more important due to disrupted global tradeflows.
Previously regular imports from Asia have been sharply reduced by multiple factors including soaring logistics costs, limited vessel space and price increases in Asia that have made the European market unattractive, despite the record price increases seen for European contract pricing during 2021.
There was also a smaller flow of material from the US, but this has been effectively ended by the closure of Shandong Ruyi’s Texas production facility at the end of 2020.
Imports are likely to remain limited for the rest of the year and into 2022 due to logistics constraints, global tight supply and rising consumption in Asia for polybutylene adipate terephthalate (PBAT).
CONSTRAINED DOMESTIC SUPPLY, RESTRICTED IMPORTS
European contract pricing has seen quarterly price increases far larger than previous market movements throughout the year.
Before 2021 the largest quarterly price increase seen in the BDO market was €200/tonne, but Q3 2021 BDO pricing stands at €2,250/tonne above Q4 2020 levels.
BDO is a chemical intermediate used in the production of polymers such as polybutylene terephthalate (PBT) and spandex, solvents and fine chemicals.
The succesive quarterly price increases were largely driven by the absence of import volumes, which tightened the market and left buyers with very limited alternatives to domestic suppliers of material.
Domestic production issues at INEOS and BASF – as well as an outage at LyondellBasell earlier this year – have worsened the pressure put on the European market by the absence of import volumes.
Asian export availability to Europe remains constrained by snug supply and challenges in long-haul freight.
Suppliers in Asia largely focus on regional outlets where demand has been decent in recent months.
“We continue to receive enquiries from Europe, but did not ship any over due to limited vessel space,” said a producer in NE Asia.
Hesistancy to commit to import volumes was also heard in Europe.
A European buyer said that “if I buy Asian material… always have risk vessel will be delayed.”
“If desperate (I am) willing to take that risk. At the moment not the case.”
–
CONSISTENT AND STRONG DEMAND
Strong demand for material across end uses has also pulled on limited stocks of material and further driven price increases.
The key automotive sector remains a strong source of consumption despite production limitations caused by a lack of semiconductors, with sources saying that demand will be even stronger once the shortage is resolved.
Demand is expected to stay strong for the rest of the year and into 2022, with sell-side sources anticipating consumption in 2022 to be similar to or stronger than the high levels seen this year.
One producer said that negotiations for next year started much earlier than usual as “a lot of customers (are anticipating a) strong 2022 and want to secure volume”.
PBAT – A FAST GROWING NEW APPLICATION
On top of supply constraints and demand from previous applications, European sources expect the growth in demand for polybutylene adipate terephthalate (PBAT) to put further pressure on BDO availability in 2022.
PBAT is a biodegradable plastic used to replace polyethylene (PE) in single use applications such as plastic bags.
It is a niche product in Europe, but in China 1.8m tonnes/year of new capacity is expected to open during 2021 and 2022 with more than 3m tonnes of additional capacity to follow.
Some of these projects include additional BDO capacity which will counterbalance the additional consumption, but only 321,000 tonnes/year of additional BDO production is expected to open in Asia before the end of 2022, according to ICIS data.
This wave of new capacity is driven by Chinese legislation mandating the use of biodegradable plastic for single use applications.
This ban began on a small scale focused on major cities in 2020 and will become more widespread in coming years with the goal of covering all urban areas by 2025.
The global BDO market is already tight, so this new application has the potential to cut off Asian exports to Europe and even encourage European exports as more and more BDO goes into PBAT.
Insight by Nick Cleeve
September 14, 2021
Europe BDO market to be defined by self-sufficiency, tightness in 2022
Author: Nick Cleeve
2021/09/07
LONDON (ICIS)–The European butanediol (BDO) market has changed radically during 2021, with domestic supply of material becoming much more important due to disrupted global tradeflows.
Previously regular imports from Asia have been sharply reduced by multiple factors including soaring logistics costs, limited vessel space and price increases in Asia that have made the European market unattractive, despite the record price increases seen for European contract pricing during 2021.
There was also a smaller flow of material from the US, but this has been effectively ended by the closure of Shandong Ruyi’s Texas production facility at the end of 2020.
Imports are likely to remain limited for the rest of the year and into 2022 due to logistics constraints, global tight supply and rising consumption in Asia for polybutylene adipate terephthalate (PBAT).
CONSTRAINED DOMESTIC SUPPLY, RESTRICTED IMPORTS
European contract pricing has seen quarterly price increases far larger than previous market movements throughout the year.
Before 2021 the largest quarterly price increase seen in the BDO market was €200/tonne, but Q3 2021 BDO pricing stands at €2,250/tonne above Q4 2020 levels.
BDO is a chemical intermediate used in the production of polymers such as polybutylene terephthalate (PBT) and spandex, solvents and fine chemicals.
The succesive quarterly price increases were largely driven by the absence of import volumes, which tightened the market and left buyers with very limited alternatives to domestic suppliers of material.
Domestic production issues at INEOS and BASF – as well as an outage at LyondellBasell earlier this year – have worsened the pressure put on the European market by the absence of import volumes.
Asian export availability to Europe remains constrained by snug supply and challenges in long-haul freight.
Suppliers in Asia largely focus on regional outlets where demand has been decent in recent months.
“We continue to receive enquiries from Europe, but did not ship any over due to limited vessel space,” said a producer in NE Asia.
Hesistancy to commit to import volumes was also heard in Europe.
A European buyer said that “if I buy Asian material… always have risk vessel will be delayed.”
“If desperate (I am) willing to take that risk. At the moment not the case.”
–
CONSISTENT AND STRONG DEMAND
Strong demand for material across end uses has also pulled on limited stocks of material and further driven price increases.
The key automotive sector remains a strong source of consumption despite production limitations caused by a lack of semiconductors, with sources saying that demand will be even stronger once the shortage is resolved.
Demand is expected to stay strong for the rest of the year and into 2022, with sell-side sources anticipating consumption in 2022 to be similar to or stronger than the high levels seen this year.
One producer said that negotiations for next year started much earlier than usual as “a lot of customers (are anticipating a) strong 2022 and want to secure volume”.
PBAT – A FAST GROWING NEW APPLICATION
On top of supply constraints and demand from previous applications, European sources expect the growth in demand for polybutylene adipate terephthalate (PBAT) to put further pressure on BDO availability in 2022.
PBAT is a biodegradable plastic used to replace polyethylene (PE) in single use applications such as plastic bags.
It is a niche product in Europe, but in China 1.8m tonnes/year of new capacity is expected to open during 2021 and 2022 with more than 3m tonnes of additional capacity to follow.
Some of these projects include additional BDO capacity which will counterbalance the additional consumption, but only 321,000 tonnes/year of additional BDO production is expected to open in Asia before the end of 2022, according to ICIS data.
This wave of new capacity is driven by Chinese legislation mandating the use of biodegradable plastic for single use applications.
This ban began on a small scale focused on major cities in 2020 and will become more widespread in coming years with the goal of covering all urban areas by 2025.
The global BDO market is already tight, so this new application has the potential to cut off Asian exports to Europe and even encourage European exports as more and more BDO goes into PBAT.
Insight by Nick Cleeve
September 11, 2021
Arsenal’s Polytek Acquires Specialty Resin & Chemical Easton, PA & Dowagiac, MI – September 7, 2021 – Polytek® Development Corp. (“Polytek”), a manufacturer of specialty polymers for coating, mold making, and casting applications, announced today the acquisition of Specialty Resin & Chemical. Polytek is a portfolio company of Arsenal Capital Partners. Founded in 2007 and located in Dowagiac, MI, Specialty Resin & Chemical is a supplier of user-friendly mold making, casting, and coating products, including bar top epoxy resin and polyurethane resin. They fit in well alongside Polytek’s existing consumer brands because of their strong focus on customer service and dedication to providing products specifically designed for hobby and art communities. Doug Lorenz, CEO of Polytek, commented “With years of experience and a broad and diverse product line, Specialty Resin is well positioned to serve do-it-yourselfers, hobbyists, and small businesses. They have created a name for themselves among these communities and we are very excited to help them build and grow upon the great success they have already achieved.” Daniel Wilson, owner of Specialty Resin & Chemical, will remain in an active role within the Specialty Resin & Chemical brand, and the two companies will continue to do business under their existing names. Daniel commented, “Our goals align very closely with Polytek’s mission, and we are eager to join their team. We look forward to continuing to support our customers while developing new product options for them.” Genesis Capital, LLC acted as the financial advisor to Polytek.
About Polytek® Development Corp. Founded in 1984, Polytek® Development Corp. is headquartered in Easton, PA with operations in Pomona, CA, Galesburg, MI, Franklin, IN, Grants Pass, OR, and South St. Paul, MN. Polytek is a leading manufacturer of specialty polymers including polyurethane elastomers and casting resins, silicone, epoxies, latex, thermoplastic elastomers, and board materials. These systems are used primarily in mold making, casting, and coating applications in industrial and consumer sectors, including construction and restoration, arts and crafts, DIY, product design and manufacturing, entertainment, and education. Polytek® brands include Raw Material Suppliers, Alumilite, BCC Products, Environmental Technology, Inc., Pro Marine Supplies, Stone Coat Countertops, Incredible Solutions, Custom Polymer Designs and MAS Epoxies. www.polytek.com
About Specialty Resin & Chemical Specialty Resin & Chemical supplies high-quality mold making, casting, and coating solutions to hobbyists, small businesses, and the DIY community. Product lines include epoxy resin, polyurethane resin and rubber, silicone rubber and related accessories. www.specialtyresin.com
About Arsenal Capital Partners Arsenal is a leading private equity firm that specializes in investments in middle-market industrial growth and healthcare companies. Since its inception in 2000, Arsenal has raised institutional equity investment funds of $5.3 billion, has completed more than 200 platform and add-on investments, and achieved more than 30 realizations. Arsenal invests in industry sectors in which the firm has significant prior knowledge and experience. The firm works with management teams to build strategically important companies with leading market positions, high growth, and high value-add. Visit www.arsenalcapital.com.
September 11, 2021
Arsenal’s Polytek Acquires Specialty Resin & Chemical Easton, PA & Dowagiac, MI – September 7, 2021 – Polytek® Development Corp. (“Polytek”), a manufacturer of specialty polymers for coating, mold making, and casting applications, announced today the acquisition of Specialty Resin & Chemical. Polytek is a portfolio company of Arsenal Capital Partners. Founded in 2007 and located in Dowagiac, MI, Specialty Resin & Chemical is a supplier of user-friendly mold making, casting, and coating products, including bar top epoxy resin and polyurethane resin. They fit in well alongside Polytek’s existing consumer brands because of their strong focus on customer service and dedication to providing products specifically designed for hobby and art communities. Doug Lorenz, CEO of Polytek, commented “With years of experience and a broad and diverse product line, Specialty Resin is well positioned to serve do-it-yourselfers, hobbyists, and small businesses. They have created a name for themselves among these communities and we are very excited to help them build and grow upon the great success they have already achieved.” Daniel Wilson, owner of Specialty Resin & Chemical, will remain in an active role within the Specialty Resin & Chemical brand, and the two companies will continue to do business under their existing names. Daniel commented, “Our goals align very closely with Polytek’s mission, and we are eager to join their team. We look forward to continuing to support our customers while developing new product options for them.” Genesis Capital, LLC acted as the financial advisor to Polytek.
About Polytek® Development Corp. Founded in 1984, Polytek® Development Corp. is headquartered in Easton, PA with operations in Pomona, CA, Galesburg, MI, Franklin, IN, Grants Pass, OR, and South St. Paul, MN. Polytek is a leading manufacturer of specialty polymers including polyurethane elastomers and casting resins, silicone, epoxies, latex, thermoplastic elastomers, and board materials. These systems are used primarily in mold making, casting, and coating applications in industrial and consumer sectors, including construction and restoration, arts and crafts, DIY, product design and manufacturing, entertainment, and education. Polytek® brands include Raw Material Suppliers, Alumilite, BCC Products, Environmental Technology, Inc., Pro Marine Supplies, Stone Coat Countertops, Incredible Solutions, Custom Polymer Designs and MAS Epoxies. www.polytek.com
About Specialty Resin & Chemical Specialty Resin & Chemical supplies high-quality mold making, casting, and coating solutions to hobbyists, small businesses, and the DIY community. Product lines include epoxy resin, polyurethane resin and rubber, silicone rubber and related accessories. www.specialtyresin.com
About Arsenal Capital Partners Arsenal is a leading private equity firm that specializes in investments in middle-market industrial growth and healthcare companies. Since its inception in 2000, Arsenal has raised institutional equity investment funds of $5.3 billion, has completed more than 200 platform and add-on investments, and achieved more than 30 realizations. Arsenal invests in industry sectors in which the firm has significant prior knowledge and experience. The firm works with management teams to build strategically important companies with leading market positions, high growth, and high value-add. Visit www.arsenalcapital.com.
September 11, 2021
Sherwin-Williams, PPG profit warnings highlight raw material challenges, Ida impact on coatings
Author: Joseph Chang
2021/09/08
NEW YORK (ICIS)–Earnings warnings from US-based coatings companies Sherwin-Williams and PPG are shining a brighter spotlight on raw material cost inflation and supply chain challenges, especially following the impact of Hurricane Ida.
Any hope for a return to normal seasonality by Q4 2021 in many product chains has been dashed by the additional supply constraints as companies struggle to start up plants.
“All we’ve seen since winter storm Uri [in mid-February] was a scramble to rebuild inventories, and the consensus was that would be complete in the third or fourth quarter. Well, this is another hit, so it’s probably going to be into 2022 before things begin to return to normal,” said Kevin Swift, chief economist at the American Chemistry Council (ACC) on an ICIS podcast.
COATINGS AND SPECIALTIES TAKE HIT
This will hit coatings and other specialty chemicals companies harder, as they source many different raw materials for the products they formulate and sell versus commodity chemicals companies, which rely on a few select feedstocks.
“Although it has yet to be fully quantified, we think Hurricane Ida likely made a difficult supply situation worse – there appears little slack in the petrochemical supply chain,” said Laurence Alexander, analyst at Jefferies, after the PPG announcement.
“We think companies such as Avient, Axalta, BASF, DuPont, 3M, Quaker Chemical, Sherwin-Williams, Trinseo and Valvoline will also likely be constrained by similar supply chain issues,” he added.
On the coatings raw materials side, as of 8 September, 58% of methylene diphenyl diisocyanate (MDI), 35% of isopropanol (IPA), 23% of n-butanol (NBA) and 23% of glycol ethers capacity in the US remained offline in the wake of Ida, according to the ICIS Live Disruptions Tracker.
Butanediol (BDO), which is used to make polyurethane surface coatings, among many other products, also has 57% of US capacity offline.
Less impacted is key coatings raw material acrylic acid with 9% of capacity offline, and titanium dioxide (TiO2) which was not directly impacted by Ida.
| US plant status relevant to coatings as of 8 Sep | ||||
| Company | Site | Products | Status | Force Majeure |
| BASF | Geismar, Louisiana | BDO, EO, isocyanates, polyols | Expected Restart | |
| BASF | Geismar, Louisiana | BDO | Expected Restart | Declares FM |
| BASF | Geismar, Louisiana | Isocyanates, polyols | Expected Restart | Declares FM |
| Dow | Plaquemine, Louisiana | Ethylene, propylene, benzene, toluene, EO, glycol ethers, PE, PG, PO | Expected Restart | |
| Dow | Taft, Louisiana | Ethylene, propylene, acetic acid, acrylic acid, acrylates, ethanolamines, EO, glycol ethers, LLDPE, oxo-alcohols | Shutdown | |
| ExxonMobil | Baton Rouge, Louisiana | Ethylene, propylene, BD, benzene, toluene, IPA, PA, plasticizers, PE, PP, base oils | Restart | |
| Rubicon | Geismar, Louisiana | MDI, polyether polyols, aniline, nitrobenzene | Shutdown | |
| Shell | Geismar, Louisiana | EO, EG, glycol ethers, linear alcohols, linear olefins | Shutdown |
While raw material supply constraints from Ida will limit coatings production, demand is unlikely to wane and may even accelerate in the short term on rebuilding efforts following the storm, which not only hit Louisiana, but caused damage all along its path to the northeast US.
Weather forecasting service AccuWeather estimates $95bn in damage and economic loss from Ida, just under the $105bn-115bn in damage from Hurricane Rita in 2005. It would be the seventh costliest hurricane in terms of economic impact.
SHERWIN-WILLIAMS WARNING
Sherwin-Williams, the world’s largest coatings company with over $18bn in 2020 sales, on 8 September lowered Q3 sales guidance to be up or down by a low-single digit percentage over the year-ago period, versus prior guidance of up by a mid-to-high single-digit percentage.
Sherwin-Williams CEO John Morikis cited “persistent and industry-wide raw material availability issues” not improving as anticipated, hindering the company’s ability to fully meet strong demand across professional architectural and industrial coatings.
The company expects raw material availability, including from the impact of Ida, to negatively impact Q3 sales in the high-single digit percentage range. This compares with prior guidance of less than the 3.5% negative impact experienced in Q2.
“At the same time, our total cost basket, including raw materials, transportation and labour, continues to move upward,” said Morikis.
In response, the company announced a surcharge of 4% in its Americas Group, effective 20 September through year end, on top of significant pricing actions already taken.
For those watching inflation gauges, the commodity chemicals price increases from Ida will clearly flow through all the way to specialties and end products.
PPG CITES WORSENING SUPPLY DISRUPTIONS
PPG on 7 September announced it expects Q3 sales will be $225m-275m lower versus expectations at the start of Q3, citing increasing disruptions in commodity supplies, reductions in customer production due to shortages of parts such as semiconductors (impacting auto, appliances) and continuing logistics challenges worldwide.
On top of that, raw material inflation is trending higher than previously expected on the order of $60m-70m. Ida could bring additional supply chain effects, it noted.
PPG is also implementing price increases to offset elevated raw material costs and is seeking further hikes. It sees overall price increases of around 5% in Q3. The company also withdrew earnings guidance for Q3 and Q4.
Jefferies analyst Alexander slashed his 2021 earnings per share (EPS) estimate on PPG from $8.50 to $6.70 but pointed out that “with underlying fundamental demand trends likely intact and price increases underway, we expect a sharp recovery in earnings power in 2022”.
Insight article by Joseph Chang
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