FocusAsia EDC rises $30/tonne on rising demand

05 June 2008 11:28  [Source: ICIS news]

By Ng Hun Wei

SINGAPORE (ICIS news)--Asian ethylene dichloride (EDC) prices have risen by over $30/tonne in the past month on improving demand, industry sources said this week.

Deals for EDC were this week heard closed at around $460-470/tonne CFR (cost and freight) northeast (NE) Asia for second half June delivery with current offers at $500/tonne. Cargoes for first half June delivery were earlier heard sold at $450/tonne.

Despite rising feedstock costs, Asian EDC prices had remained unchanged at $425/tonne from mid-February to early-May, according to global chemical market intelligence service ICIS pricing.

Spot prices of feedstock ethylene in NE Asia in contrast have risen by more than $110/tonne since mid-February while prices of downstream polyvinyl chloride (PVC) increased by $160/tonne over the same period.

"Demand for EDC has been rising in recent weeks and I think EDC prices are now beginning to catch up with the price movements in the downstream and upstream markets," a NE Asia producer said.

The availability of ample deep-sea cargoes from the US was one of the main factors exerting downward pressure on Asian EDC prices, producers said.

The weak housing market in the US has reduced domestic demand for construction materials such as PVC, forcing US producers to seek export opportunities to Asia.

Around 10,000-20,000 tonnes of EDC are exported from the US to Asia each month, according to market estimates.

But rising demand from Asian PVC producers had reduced this supply length in recent weeks, lifting some of the downward pressure on EDC prices, producers and traders said.

"Comparing prices of ethylene, EDC and VCM (vinyl chloride monomer) now, it’s not surprising that producers would rather buy EDC to make PVC," said a VCM producer who exports to China.

Ethylene is combined with chlorine to make EDC, which is then cracked to make VCM, which forms the raw material for PVC. Integrated plants can choose which feedstock to purchase depending on the economics.

As it costs $200-300/tonne to convert EDC to VCM and another $100 to convert the VCM to PVC, it makes more sense to buy EDC now, said producers.

PVC was last week assessed at $1,180-1,190/tonne CFR China, while VCM prices stood at $950-980/tonne CFR NE Asia.

"You can say the price of VCM is relatively cheap compared to PVC. But EDC prices are even lower, which is why many producers are now looking to buy," said a Chinese PVC producer.

NE Asian EDC producers remained optimistic about a further rise in prices. "If crude and PVC prices remain at high levels, the margin is still attractive enough for buyers even if EDC prices were to go above $500/tonne CFR NE Asia," said one such producer.

For more on EDC, PVC and VCM visit ICIS chemical intelligence
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By: Hun Wei Ng
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