Russian ban on Pentaerythritol supplies to Europe continues to choke construction and plastic sector

The Russian Federation’s Ministry of Industry and trade had implemented a ban on supplies of Pentaerythritol (PEN) and Urotropine to Europe in retaliation to the perceived sabotage by European foreign carriers and customs authorities of Russian methanol shipments. Since methanol is a critical raw material in the production of Pentaerythritol, it is natural that the kremlin had decided against supplying PEN to Europe as a countermeasure to secure its huge methanol market in Europe.

Europe’s dependency on Russian PEN is more than its dependency on Russia’s natural gas supplies. PEN being a critical raw material for many industrial applications, the EU had consciously decided against a ban on its supplies from Russia. Nearly 40% of PEN supplies to Europe originate in the Russian federation. Although China has, over the last decade replaced Europe as the major manufacturing hub, the current pandemic situation had impacted the production and exports of PEN.

Thus, the EU will be forced to lift their ban on Russian exports of Methanol as a conciliatory move as PEN is an extremely critical raw material for Europe’s paints and coatings industry. Methanol prices in Europe have been on a consistent rise since the beginning of the new year. The price of Methanol assessed on an FD Hamburg basis has increased by over 20% during Q1 of FY22 exerting high-cost pressure on PEN manufacturers in Germany which is Europe’s major production hub for PEN.

Europe could be up for a long and protracted battle on its eastern fringes due to which the uncertainty in the energy markets will likely persist at least till the end of the quarter-ending June. The PEN market players in Europe could be roiled by the current geopolitical-economic scenario currently pervading the region, and ChemAnalyst’s forecast for the PEN market remains mixed with the May and June prices likely to be higher than those of March and the Q2 prices on an average, are expected to be higher than those of Q1.