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Why a storm in Texas has increased prices of Propylene Glycol in Australia

Market Insights

Propylene Glycol (PG) is one of the chemical industry’s great utilities — the same chemical is used as a heat transfer fluid in our office blocks (industrial grade) and to help keep our facial moisturisers smooth (USP grade). But if you’re one of the many chemical manufacturers here in Australia who feels like PG is harder to find, and more expensive, than it used to be — you’d be right!

The price of Propylene Glycol has almost doubled in the last 12 months

In June this year, the price of PG hitting Australian ports was double what it was 10 months earlier, in August 2020 (see blue line in chart).

Graph showing price and volume of propylene glycol imported into Australia
Graph showing price and volume of propylene glycol imported into Australia
Source: ABS Import Data, ChemCloud analysis

On closer inspection, the price really started to increase from February 2021 onwards. There were two main drivers for this.

Australia already had lower than normal reserves…

Australia does not have its own manufacturing capability of PG — it is all imported. In the last four months of 2020, imports of PG dropped dramatically, lowering stocks in Australia. This was probably driven by Victoria’s lockdown, which curbed activity in Australia’s second largest state. But this meant when the lockdown ended in late October, PG stocks in Australia were already low.

… and then felt the aftershocks of a deep freeze in Texas

In normal circumstances this would have had a small impact on the price, which would have evened out in the long run. However in February 2021, a severe ice storm hit Texas, where the majority of PG in the United States is manufactured.

According to Bloomberg, 83% of US PG capacity was pushed offline by the ice storms. One month later, 60% of capacity was still offline — pushing prices to record highs.

In Australia, we felt the price squeeze almost immediately, with PG prices rising 30% between February and March, and 75% by June of this year.
The outlook for PG prices in Australia remains volatile

Production has resumed in the US, which has eased the pressure on global supply of PG. However, in Australia we’re still seeing landed prices much higher than they were 12 months ago — driven by the lower than usual stock in the country, and now impacted by high freight prices.

At ChemCloud we’re helping customers explore new supply options for PG and other chemicals and raw materials, having been burnt by a combination of high prices and tight supply over the past 12 months — a sensible strategy given supply chain disruptions look to continue well into 2022. Even smarter when there’s the chance of a freak storm (not to mention global pandemics) throwing out your best laid plans!

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