By Xu Shinan, Oilchem
The COVID-19 outbreak caused repeated delay in downstream production resumptions. Industry players has begun to promote IPA applications in the disinfection sector since early February but to little avail, as ethanol is widely used for disinfection purpose in China. Shrinking demand dragged down domestic IPA prices to RMB5 600/t from the pre-holiday level of RMB7 100/t.
Whereas in overseas countries, IPA finds wider applications than ethanol in the disinfection industry. China’s IPA exports to Southeast Asia are mainly used for medical disinfection. For example, 70% and 75% IPA are widely applied to disinfect products in the cosmetic and plastic industries, disinfection wipes and medical devices, ophthalmoscopes, skin and hands, ultrasonic probes, stethoscopes, etc. IPA can also substitute for ethanol as a compound disinfectant.
The spreading pandemic in overseas countries triggered a soar in European and US IPA prices in March, mainly driven by the shortage of protective materials. In mid-March, FOB China prices were at US$770-790/t. The big price spread motivated Chinese IPA producers to divert their products to the export market.
The surging FOB China prices boosted China’s domestic IPA prices to over RMB10 000/t after the Qing Ming Festival (April 4-6). The domestic purchase prices climbed to RMB13 000/t and even topped RMB14 000/t in south China, closer to the delivery date. Meanwhile, a number of new buyers emerged, aggravating the tight supply.
On the demand side, most domestic downstream producers resisted against high IPA prices. In addition, some units began to produce IPA after renovation, increasing the IPA supply. By early May, IPA output increased by around 600 tons on a daily basis and prices were relatively low. This, combined with a notable decline in export orders weighed on domestic IPA prices.
The consumption volume of disinfectant will remain high throughout 2020, given the lingering concerns over the rampant COVID-19 pandemic. But the possibility of a supply crunch for IPA is slim, as some regions, where a lot of IPA plants have been idled for a long period of time began to use ethanol to replace IPA.
On the supply side, domestic suppliers are quite likely to cut prices to lock in June export orders. Prices remain the linchpin for China’s IPA export volume in the second half of 2020. In other words, competitive prices may lead to a surge in China’s IPA exports sometime in the second half of the year.
As for domestic prices, they are likely to drop closer to cost-level twice or three times in the second half of the year. This may cause newly renovated units to shut. When inventory pressure mounts to a certain high level, purchases from Southeast Asia may resume growth, likely to bring domestic IPA prices back onto an upward track.
