Hand sanitizer and cleaning products are in extremely high demand around the world due to the COVID-19 pandemic, and that means the need for key components such as isopropyl alcohol is also reaching new heights. Hand sanitizers use either ethanol or isopropyl alcohol as the primary ingredient, and both are becoming increasingly hard to obtain. Chemical companies are reconfiguring plants and opening new ones in order to increase supply, but they’re still having a hard time keeping up with demand. Adding to the challenge are factors such as regulations, production capacity, tariffs, and government restrictions. Both governments and manufacturers will need to find ways to make this essential ingredient more readily available.
With such an increase in demand for isopropyl alcohol globally, the market is expected to grow by over 500 thousand tons between 2020 and 2024, with half of the market’s growth originating from APAC. The region was the largest isopropyl alcohol market in 2019, with a growing pharmaceutical sector and many chemical production plants. However, demand will also be high from Europe and the Americas as these regions see an increasing number of COVID-19 cases. Isopropyl alcohol is also a commonly-used solvent in many other industries.
High demand drives up prices
Isopropyl alcohol prices are surging in Europe and North America. In March, European prices increased substantially while US prices rose much more gradually. However, with the coronavirus hitting the US and Canada more heavily towards mid-to-late March and the start of April, North America has begun seeing strong price increases as well. The slow price rise in the region was also due to a higher supply of ethanol, meaning there was less need for isopropyl alcohol. However, US exports to Europe increased over the course of the month, putting more strain on the supply. Exports to Europe are now decreasing as North American demand and prices rise and suppliers take advantage of the local market. The US has more confirmed cases than Spain or Italy, the two European countries that have so far been hit the hardest by the coronavirus, so its need for products made with isopropyl alcohol is high.
Isopropyl alcohol manufacturers maximize capacity
In order to meet this surging demand, chemical manufacturers are increasing their production, reconfiguring plants or building new ones entirely. For example, Ineos, a producer of isopropyl alcohol and ethanol, has been running its production plants at full capacity and prioritizing medical uses for the materials. The company has already built a new plant in the UK to use these ingredients to produce hand sanitizer and is planning to build a second and third in Germany and France.
Ineos and some other chemical companies are finding that hand sanitizer manufacturers are currently operating at capacity, leading them to start producing their own sanitizer in order to boost supply and make use of their own ingredients. Dow Chemical is aiming to produce more products such as hand sanitizer, which it has begun manufacturing in Germany and is planning to produce in the US as well.
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Supply chain challenges
However, chemical manufacturers are facing sourcing challenges themselves. Not all required ingredients can be sourced domestically, and importing goods can be very expensive at the moment. In the US, groups are asking the government to drop tariffs on Chinese imports, as the country is a big supplier for the chemicals industry and importers are currently facing far higher shipping expenses than usual.
Along with the challenge of obtaining the needed ingredients to make it, isopropyl alcohol itself is also becoming harder to source internationally. France, one of the world’s biggest producers of the product, has ordered that all isopropyl made in the country must stay in the country, in order to ensure it has enough product to meet demand. It’s possible that other countries will follow suit as healthcare institutions struggle to find enough supplies and equipment for their workers and patients.
This decision adds additional challenges for countries that don’t have their own supplies of the product, and the situation could become even more challenging if other major producers choose to follow suit. And in India, chemical producers have had to reduce operations or close plants entirely due to the country’s lockdown. All manufacturing activities have been ordered to stop, with a few exceptions that don’t currently include chemicals. Given that India had previously ceased exporting hydroxychloroquine, a ban on isopropyl alcohol exports is a possibility that purchasers should be prepared for.
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Hand sanitizer demand impacts other markets
Hand sanitizer may be one of the biggest focuses for manufacturers and healthcare institutions, but it isn’t the only medical product that uses isopropyl alcohol. Rubbing alcohol, as well as alcohol swabs and wipes, also use the product, and all of them have become incredibly hard to find. Consumers are buying them up in order to make their own hand sanitizer and to build up a supply of cleaning products, which is impacting users who need them for medical reasons. People with diabetes, for example, use them in their regular medical routines in order to prevent infection. Such people are at increased risk from the coronavirus, and are now also having trouble finding the disinfectants they need for their treatments. The problem is compounded by the fact that manufacturers are frequently prioritizing hospitals, so there are fewer products available for regular consumers. While it’s important that hospitals and other institutions have enough sanitizer and supplies, this combined with consumer stockpiling means that rubbing alcohol and related products are facing severe shortages as well.
There are many factors at play in the global isopropyl alcohol market. While it’s a key component in hand sanitizer, it also faces competition from ethanol, which is commonly used in its place. Manufacturers also have to deal with supply shortages, tariffs, and high shipping costs, as well as make decisions on which customers to prioritize. Focusing on healthcare supplies for medical institutions is important, but means that other products and customers start to fall by the wayside. Buyers of isopropyl alcohol therefore have their own supply challenges to content with, especially if they’re producing items that are deemed non-essential. Many companies are increasing production and building new facilities, which should help to alleviate the shortages, but as the global COVID-19 pandemic continues, manufacturers and consumers will need to keep a close eye on the markets.
Learn more about the global isopropyl alcohol industry with Technavio’s market research report. Try a free sample today!
