The production margin for 2-ethyl hexanol flipped to positive and hit an 11-month high Thursday on extremely tight spot supply in Northeast Asia.
The margin to make 2-EH was calculated at $64/mt at the Asian market close Thursday, reversing the generally negative margins seen since the start of the year.
The last time the 2-EH margin was higher was March 24, 2016, at $76/mt, S&P Global Platts data showed.
2-EH is made from propylene and its breakeven is calculated as 0.8 of the prevailing price of propylene on an FOB Korea basis plus $200/mt production costs.
2-EH was assessed up $50/mt week on week at $1,020/mt CFR China and $1,040/mt CFR Southeast Asia Thursday, and propylene assessed at $945/mt FOB Korea.
Propylene prices hit $1,000/mt FOB Korea on February 16 and have remained above $900/mt since the start of February, a level not seen since August 2015.
Market sources said 2-EH prices have been rising steadily since the end of 2015, when they were around $600/mt, on the rising feedstock propylene costs.
In response, oxo-alcohol producers in Northeast Asia have been scaling back 2-EH production to reduce losses.
"2-EH prices below $1,000/mt CFR China are loss-making for us," a source at a major Northeast Asian producer said.
The extremely tight availability of 2-EH in Northeast Asia is in contrast to the Chinese domestic oxo-alcohol market, which is currently in oversupply, suppressing Chinese domestic prices, a source a major Chinese producer said.
China domestic 2-EH prices rose Yuan 300/mt week on week to Yuan 8,000/mt Thursday, equating to $929/mt on an import parity basis, due to a slight increase in demand stemming from the dearth of import availability.
Looking forward, 2-EH prices in Northeast Asia are expected to stay positive throughout the second quarter as propylene is likely to be in short supply.
This was attributed to several steam cracker turnarounds scheduled across South Korea, Japan and Shanghai in the period, which will impact the spot supply of propylene.
