01 September 2003 00:00 [Source: ICB]Epichlorohydrin (ECH) prices have fallen in quarter three (Q3) following feedstock price reductions and poor downstream demand. Many had predicted a decrease mirroring the E100/tonne softening in the propylene Q3 contract price, but ultimately ECH weakened by E50-60/tonne to E1050-1175/ tonne FD NWE, in Q3.
ECH producers had been squeezed by high feedstock costs during the first half of the year and were determined to hold on to some regained margin this quarter. A spokesman for Dow Chemicals explained: 'We were hoping to keep numbers stable. Even though propylene has softened, long-term profitability is the problem. Margins have been under pressure over the last two to three years.'
ECH prices rolled over at the start of the year at E1060-1200/tonne FD NWE. Downstream, epoxy resin producers competing with cheap Asian imports, were unable to absorb any increases. However, ECH manufacturers were successful in pushing up prices by E50/tonne, in quarter two (Q2).
Offers for Russian and Central European epichlorohydrin in Q2 appeared unrealistically high when compared with NWE material. A prolonged shutdown at a Polish plant had seriously curtailed supply and this prompted the higher prices. Nevertheless by the third quarter, competitive Russian and Central European figures were seen around E1000-1040/tonne FD NWE, incorporating more of the typical discount to NWE numbers.
The outlook for ECH for the rest of the year remains uncertain. While producers argue that propylene and chlorine are facing some upward pressure, buyers point to the ongoing weakness in the epoxy sector. Customers foresee a long market in quarter four leading to weaker numbers.
David Jackson, senior lead buyer at Rhodia said: 'I don't expect to see any upward movement but a gradual easing off in prices, especially if aggressively priced Russian volumes enter the market.' Producers are determined to at least hold on to current pricing.
In the longer term, Spolchemie's Czech epoxy plant, destroyed by fire in November 2002, is set to be rebuilt by mid-2004, tripling its former capacity to 30 000 tonne/year.
Asian epoxy capacity is also to be increased and a 30 000 tonne/year Saudi ECH plant is in the planning stages for completion in 2006.
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