Solvent Demand Remains Weak Amid Bearish Economic Outlook

The global solvents market has been affected by a bearish economic outlook throughout 2022, with demand remaining weak, several producers having to cut operating rates, and energy costs surging due to the Russia-Ukraine war, causing a plunge in demand for end-products, according to Beroe research

Lingering worries over weakness in Asia's currencies, including the Chinese yuan, against the U.S. dollar have served to crimp demand, making imports uneconomical. The market participants expect a slowdown in consumption in December due to destocking activity and the shorter working month.

In the next year, 2023, the demand for solvents might pick up slightly in January due to restocking activities. The automotive sector is expected to continue to suffer from weak demand during H1 2023, but may remain under pressure from a shortage of key components. Other key downstream sectors, including extruded sheeting, have also been hit by weak overall demand.

Prices are expected to drop in the U.S. and Asia due to an improved supply situation and weak demand from the automotive and construction sector is not expected to improve until Q2 2023. Fall in crude oil prices will also support the decline in alcohols and solvents prices in Q4 2022. Supply gains dwarfing demand growth will continue to squeeze the utilization rate of domestic production capacity. This mismatch will also promote domestic production enterprises to speed up their search for overseas export opportunities.

• The estimated average price for Acetone is $1065/MT in 2022 and $1010/MT in 2023.

• The estimated average price for Isopropanol is $1341/MT in 2022 and $1152/MT in 2023.

• The estimated average price for Methanol is $272/MT in 2022 and $260/MT in 2023.

• The estimated average price for Ethyl Acetate is $1576/MT in 2022 and $1318/MT in 2023.

In conclusion, the solvents market outlook is weak due to bearish economic conditions, but there is a hope of slight recovery in 2023 with restocking activities and improved supply situation. However, the market is expected to remain under pressure due to a shortage of key components and weak demand from the automotive and construction sectors.