Ethanolamines Outlook – Are We Heading for a New Normal for Ethanolamines in West Europe?
After the skyrocketing prices for ethylene oxide (EO) derivatives in West Europe in 2021 — due to supply limitations stemming from reduced imports, lower domestic supply, energy price surges, and increased feedstock costs — the initial months of 2022 through April sustained comparably high prices. This was due to persistent production constraints in countries exporting to the region. As the economic sentiment in West Europe began to sour, domestic demand in key sectors, such as construction, automotive, textiles, oil and gas, cleaning, and personal care, started dwindling in the latter half of 2022 and continued its decline into 2023.
2023 had been initially forecasted as a typical year from an economic standpoint. The reopening of mainland China was expected to boost demand, but such expectations did not materialize. At the European level, the economic outlook for 2023 shifted from recessionary concerns to a cautiously optimistic stance. The construction sector’s performance in the first quarter surpassed expectations. However, this minor uptrend was short-lived, as key industries underperformed in terms of demand. This affected the production rates and prices for EO derivatives throughout the year. There was only a marginal increase in consumption in August, becoming more prominent after the summer holidays. But the uptick was primarily due to the contractual volume to clear back orders. This was evident in the automotive industry as well, where previous supply chain issues, such as semiconductor shortages, had inhibited production. As those obstacles began to clear, the sector saw a temporary surge in growth, primarily in August and September. However, the outlook for the automotive sector in Q4 2023 and into 2024 remains tempered. The backlog of orders has been addressed, and prevailing poor consumer sentiment is expected to weigh down the market once more.
The construction segment experienced marginal growth in 2023, with civil engineering projects outpacing both residential and non-residential building. High interest rates and surging inflation across Europe hampered private investments, resulting in an already tepid construction sector expected to cool further in Q4 due to seasonality. Only modest growth is projected for 2024. The textiles sector, meanwhile, grappled with significant challenges, and the demand for EO derivatives in this space dwindled. High inventory levels among apparel retailers suppressed the need for additional EO derivatives. Segments associated with personal care and cleaning, which had surged during the COVID-19 pandemic, have now stabilized at pre-pandemic levels, with no significant growth anticipated in the near future. While these trends were evident across most EO derivatives, this report will focus exclusively on ethanolamines — specifically, monoethanolamine (MEA), diethanolamine (DEA), and triethanolamine (TEA).
The European ethylene contract price (ECP) surged in 2022, with a yearly average of €1,413 per metric ton — an increment of €315 per metric ton from 2021. In 2023, softer naphtha prices led to a lower year-to-date average compared to the previous year. However, naphtha prices rebounded in September, causing the first increase in the ethylene ECP since March. The current year-to-date average naphtha price in the region is akin to the 2021 average. However, it remains significantly below the 2022 figures, which marked the highest average since 2014.
On the ammonia front, prices surged in 2022 due to supply shortages and elevated natural gas prices, reaching an annual average of $1,182 per metric ton CFR NW Europe. Ammonia spot prices peaked in April 2022 at an average of $1,474 per mt CFR NW Europe and fluctuated for the remainder of the year. Throughout 2023, they declined month-on-month until August, when the trend reversed. Currently, prices sit at less than half of the average value of 2022. With the ongoing volatility of natural gas prices, there’s a heightened likelihood of further market fluctuations for ammonia, which could, in turn, influence production costs for ethanolamines stemming from ammonia.
After the price surge across all EO derivatives in 2021 and the early months of 2022, a combination of more product availability and dwindling domestic demand in Western Europe, due to weak end-consumer demand, led to narrow price fluctuations. These were soon followed by a price downtrend from the previously observed highs. This trend continued into 2023, and it became evident early on that a languishing economic sentiment would overshadow the market for much of the year. For reference, MEA spot prices in 2023 up to September averaged €1,896 per metric ton (mt) delivered Northwest (NW) Europe, marking a nearly 38% year on year decrease. DEA prices saw a modest decrease of 3% from the previous year’s €1,354 per mt delivered NW Europe. The yearly-averaged TEA spot prices declined in both 2022 and 2023, with a 13% decrease in 2022 compared to 2021 and a 15% decrease in 2023, averaging €1,252 per mt delivered.
In late April 2023, Ineos declared a force majeure (FM) on ethanolamines at its Lavera facility in France. This declaration persisted through summer and into autumn due to a concurrent shutdown of its EO unit at the same site, severely limiting ethanolamine production. The plant boasts an annual capacity of 55 kt for ethanolamine production. This event coincided with the emerging attractiveness of exports to the United States (US) for ethanolamines, especially MEA and DEA. This was due to robust demand in the US oil and gas sector and the onset of the crop season, combined with US prices significantly outpacing those in West Europe. The West European market swiftly reacted to the FM declaration, leading to a brief uptick in prices. However, by the end of May, prices began to decline again. The subdued demand was so pronounced that even with a major player out of the game in Europe, the price downtrend remained unchallenged.
In July 2023, an explosion at Dow’s Plaquemine facility in Louisiana, USA, led to a FM declaration on EO. This impacted Ineos’ ethanolamine production at the same location, as they source EO from Dow’s neighboring plant. Consequently, Ineos was forced to declare another FM on ethanolamines in the US, with an ongoing FM already in place in Europe. The Ineos facility at Plaquemine boasts a production capacity of 179 kt annually for ethanolamines — over three times that of their Lavera facility in France. The market keenly watched for potential repercussions from such a significant event. Given the likelihood that repair work at Dow would span several months, there was the possibility that substantial volumes of ethanolamines would remain offline. With Europe being a regular ethanolamine importer, the prospect of a major unit remaining offline for an extended period in a principal exporting nation to the region was disconcerting. However, even this major event elicited only a transient market response. Prices stabilized briefly for ethanolamines in West Europe before resuming their decline.
Trade data for EU28 indicate that ethanolamine imports into the region stood at 59 kt up to July 2023. This level is akin to the first seven months of 2021. However, 2022 saw more substantial imports, with a year-to-date figure of 72 kt. In 2021, MEA imports were 4 kt higher, DEA 2 kt higher, and TEA 8 kt lower than in 2023. Conversely, ethanolamine exports up to July 2023 amounted to 37 kt, compared to 36 kt in 2022 and 45 kt in 2021.
The data reveal that 45% of 2023 imports up to July originated from the US, with 44% arriving from Saudi Arabia. Mexico and mainland China each accounted for an additional 3% of the share. The market also grappled with competitively priced imports from Asia, which appealed to cost-conscious customers.
At present, it remains uncertain whether demand will see any significant uptick in the last quarter of 2023. The confluence of feedstock cost pressures — from increasing naphtha prices and volatile natural gas supplies — was expected to impact the market significantly. While some EO derivatives did see this impact, with contractual price hikes based on feedstock formulae passed onto consumers, the subdued demand in most ethanolamine end-uses meant that spot prices remained largely unaffected. Typically, heightened upstream feedstock costs should be reflected in ethanolamine spot prices in a tight market. However, this hasn’t been the case thus far, with buyers adopting a wait-and-see approach amidst ongoing volatility forecasts for feedstock in the coming months.
Considering the surges in feedstock costs, the logical expectation would be an uptrend in ethanolamine prices in the coming months. However, such a trend has yet to manifest. With lackluster consumer demand expected to linger over the final quarter of this year, the prospect of an improvement in ethanolamine demand from its current state appears slim. Market dynamics could shift due to limited availability resulting from regional maintenance, low production rates, or changes in the trade balance.
In 2024, the construction industry is projected to grow at a more sluggish pace than in 2023. Oxford Economics currently forecasts a 1.8% growth for the sector in 2023, largely attributed to civil engineering projects. In contrast, both residential and non-residential buildings saw limited progress this year, with growth figures of 0.1% and 2.9%, respectively. This is expected to impact demand for cement grinding applications and wood coatings. Some demand is projected from the extraction sector, which includes oil and gas. MEA is used here to produce the acid scavenger triazine. Some non-durable consumer goods sectors, such as textiles and related applications, are unlikely to recover in the near term. The demand for personal care products and cleaning applications is expected to stabilize. However, a return to the elevated levels seen during the COVID-19 pandemic is considered improbable. A modest increase in the total agricultural output is predicted for the eurozone in 2024, which could slightly boost ethanolamine demand in this domain.
The implications of these market shifts are extensively discussed in our 2024 World Analysis of Ethylene Oxide and Monoethylene Glycol. This subscription provides in-depth insights into the significant challenges facing these industries, offering a projected outlook for the next 5 to 10 years.
Author
Ana Trufasila
Senior Research Analyst (EMEA)
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