Hydrocarbon solvent hexane prices hit nine-year high on bullish fundamentals

Prices in the European hydrocarbon solvents market rose Aug. 17, with hexane reaching a nine-year high on firm demand and tight supply, according to sources.

Hexane has seen a rally in recent weeks prompted by tight supply. Reduced production within Europe due to plant outages has contributed to current market dynamics, while consumption is firm with oil extraction and polymerization providing higher levels of demand, sources said.

The European truck price of hexane was assessed up Eur25/mt week on week and Eur45/mt since the beginning of August at Eur1,050/mt on Aug. 17, a nine-year high since the price was Eur1,040/mt on May 15, 2012. The last time hexane was higher was on May 8, 2012, at Eur1,065/mt, S&P Global Platts data showed.

"Still hearing inquiries for hexane from the Netherlands," a trader said. "The market is very tight."

Hexane has multiple uses within the solvent industry, including as an industrial cleaner, a degreaser and in adhesives. However, demand for the European hexane market stems predominantly from polymerization and the seasonal vegetable oil extraction from crops like soybeans.

In recent weeks, demand for hexane has jumped on polymerization demand, sources said. The process involves the joining together of monomer molecules to form polymer chains.

White spirit and solvent naphtha have been experiencing similar market dynamics to hexane, with sources pointing to issues in feedstock supply as well as high demand.

"The hydros market is not disconnected from feedstock," a second trader said. "It's not purely demand driven, supply is still tight."

The bullishness was reflected across the hydrocarbon aromatics complex, as underlying markers naphtha and gasoline have been buoyed on the back of an improving oil market sentiment.

Hexane is manufactured from a variety of hydrocarbon feedstocks, including naphtha, hence the CIF NWE naphtha assessment provides an indication of the cost of feedstock. Similarly, white spirit is produced from jet fuel while solvent naphtha is manufactured from the distillation of aromatic streams.

White spirit is assessed as a premium to Platts Jet CIF NWE Cargo, and therefore typically prices above solvent naphtha and hexane, which in turn are assessed as premiums to gasoline and CIF NWE naphtha markets, respectively.

Importantly for the solvent naphtha and hexane markets, gasoline and petrochemical feedstock prices have picked up in Europe amid easing lockdown measures and increased driving demand. The European CIF NWE naphtha market saw prices rise to $636.75/mt Aug. 17 from $537/mt March 25, during which notable lows were seen. Likewise, Eurobob gasoline prices rose to $700.50/mt Aug. 17 from $581.50/mt March 25.

The jet fuel industry has also seen a modest increase following more than 18 months of reduced air travel demand. Jet CIF NWE jumped to $596.75/mt Aug. 17 from $503.75 March 25, Platts data showed.

With higher underlying feedstock prices, associated aromatic hydrocarbon products such as white spirit and solvent naphtha were also pricing at fresh highs Aug. 17.