IPA price nosediving shocked by capacity expansion

As a niche raw material among polyester products, IPA trends differently-under the background of relatively stable crude oil, it nosedived. In the whole May, China IPA price declined by about 17% with Yisheng Petrochemical and Yanshan Petrochemical offering at 7,600yuan/mt and 7,900yuan/mt, down by 1,600yuan/mt and 1,700yuan/mt respectively compared with that in the end of Apr. Especially since last week, IPA offers of Yisheng Petrochemical have been adjusted down about 1,300yuan/mt and Yanshan Petrochemical down 1,500yuan/mt.

As a raw material or intermediate product, IPA is mainly used to produce polyester resin, paint, low-melting PSF, PET bottle chip and unsaturated polyester resin. But due to the small proportion among all raw materials, IPA supply and consumption in China are low. According to CCFGroup data, the consumption of IPA is less than 500kt/yr in China. With low capacity, it is more sensitive to supply and demand situation. The recent rapid adjustment of IPA price is just attributed to the shock of supply.

1. The units in maintenance restart and the supply increases.

Only Yisheng Petrochemical (Ningbo) and Yanshan Petrochemical produce IPA normally in China, so the maintenance and change of each unit will influence the operating rate significantly. In May, both units had maintenance, making the operating rate plummet to 0% directly. Both of them restarted around May 20, almost at the same time, promoting the operating rate to rally quickly and the supply to resume.

2. New capacity put into operation brings greater shock.

Around May 18, Formosa Chemicals & Fibre (Ningbo) newly built a 200kt/yr IPA unit and put it into operation, and superior products were available on May 24. At present, the products are at the stage of trial use for customers and promotion. Its startup increased IPA capacity in China by nearly 60% and made total capacity more than total consumption. However, monthly IPA imports of China still amounts to about 25kt.

Therefore, amid the increase in supply and obvious expected length, downstream plants stay on the sidelines and mostly procure for rigid demand. On the other hand, in order to vie the limited market share, lowering prices for promotion has become the direct means of suppliers.

In the future, as the products of Formosa (Ningbo) come to the market and get accepted by downstream customers gradually, the competition on the market will be intensified, which will weigh on IPA price. In mid- to long terms, IPA imports of China will inevitably decline.