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Price soars for alcohol used in hand sanitizer

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NEW YORK (The Wall Street Journal) — A key ingredient in hand sanitizers and medical disinfectants has become hard to obtain, triggering its price to surge to an all-time high.


Isopropyl-alcohol prices have more than tripled in the U.S. since March 10. They reached $3,160 a metric ton Tuesday, according to S& P Global Platts, the highest price on record dating back to 1986. In a sign of the strain on supplies, one buyer wasn’t able to get the niche petrochemical after offering to pay as much as $4,900 a ton, or more than twice the previous high, according to Platts. Sales of the product, also known as IPA or rubbing alcohol, have vaulted in recent weeks as the new coronavirus swept through Europe and the U.S., now the pandemic’s two global centers. Isopropyl alcohol dissolves the viral membrane and makes it difficult for the virus to infect a person. The spike in demand has strained a small corner of the petrochemical industry, prompting a race to maximize production by manufacturers including Exxon Mobil Corp. and Dow Chemical Co.
“This was a March unlike any other March we have had,” said Jeremy Pafford, head of North American market development at data provider ICIS. “You compare it to February and it’s night and day from a demand standpoint.”
The shortage of isopropyl alcohol is posing an obstacle to makers of disinfectant and sanitizer as they seek to lift production. Some manufacturers are turning to alternative ingredients. One, ethanol, has cheapened because of the recent fall in oil prices and the decline in car traffic in the U.S. and elsewhere. Shortages have been most acute in Europe, where restrictions on border crossings designed to contain the virus have made it harder to move alcohol around the continent by truck. The product’s price has jumped fourfold in the region since the final week of February, hitting a record €3,600 ($3,940) a ton in late March.
The boom in demand stands in contrast to other petrochemical markets, which have come under pressure following the collapse in crude-oil prices. Petrochemicals are derived from oil and natural gas, and go into products including plastics, detergent and explosives.
There should be enough isopropyl alcohol in the world to go around. Producers have the capacity to make around 3.4 million metric tons of the ingredient globally each year, said Mr. Pafford, far more than the 2.1 million tons that were consumed in 2019. The difficulty arises in getting the chemical to where it is needed.
European hospitals and hand-sanitizer users are most vulnerable because the region produces around half as much alcohol as the U.S. In recent years, Europe has topped up by buying American alcohol, but those shipments are expected to dry up as U.S. producers divert their alcohol to domestic buyers.
Europe is likely to respond by importing more from Tai- wan, Japan and other nations in Asia, where the need for disinfectant is less urgent. That poses its own problems: The time it takes to ship petrochemicals from Asia to Europe has lengthened from a few weeks to two months because of measures to stop incoming vessels from introducing the virus to ports, said Stergios Zacharakis, a Platts analyst.
The higher prices could prove to be a boon for Exxon and Dow as well as British chemicals company Ineos Group, which makes isopropyl alcohol at two plants in Germany. Profit margins on alcohol sales were already wide because the price of propylene, the main building block for the product, has been depressed by oversupply.
Producers in Europe and the U.S. typically operate at around 80% of capacity, analysts said, but are now trying to maximize output at their factories.
It isn’t a home run, however. Some manufacturers are donating alcohol and hand sanitizer to hospitals and spending money on new operations as they boost production.
Ineos is “running flat out” to make alcohol at its Herne and Moers plants in western Germany, according to a spokesman. The chemicals group will use some of this alcohol to make hand sanitizer, which it will give to hospitals for free.
Exxon’s isopropyl-alcohol unit at its Baton Rouge plant in Louisiana, the biggest in the U.S., is now running at full tilt. The company is working with state governments to supply alcohol for use in disinfectants, a spokeswoman said.
Dow plans to repurpose four plants in North America, Europe and Latin America into hand-sanitizer factories, a spokesman said, lifting the company’s sanitizer production to around 200 metric tons for a four-week period. Isopropyl alcohol will remain in short supply for the foreseeable future, he predicted.

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