FocusStandoff to continue in Asian ECH market on wide bid-offer gap

13 July 2011 07:19  [Source: ICIS news]

By Gabriel Yip

SINGAPORE (ICIS)--Demand for epichlorohydrin (ECH) in Asia is expected to remain weak over the next one to two weeks as buyers have retreated to the sidelines amid a standoff with sellers in northeast Asia, market participants said on Wednesday.

A wide bid-offer gap has emerged over the past two weeks as sellers are refusing to lower their bids as a result of falling profit margins, while buyers are withholding purchases on concerns of weakening downstream demand.

Most northeast Asia-based producers kept their offers for iso-tank parcels at $2,050/tonne FOB (free on board) northeast (NE) Asia, which was met with limited buying interest.

Asian buyers were heard bidding at $1,850-1,880/tonne FOB NE Asia for iso-tank parcels, refusing to increase their bids to meet offers.

The market is illiquid as bid and offer prices are not translating into trades at the moment, a northeast Asian producer said.

One buyer maintained its buying idea at $1,850-1,880/tonne CFR (cost & freight) Asia. Despite having requirements for ECH, the buyer is prepared to wait at the sidelines a while longer until it is convinced that prices have bottomed out.

One China-based trader said that buyers in south Asia had received lower Chinese offers and took it as an indication that downstream demand in China is worsening.

Thus, buyers in south Asia backed down from the Chinese offers, preferring to remain on the sidelines until signs of improvement in downstream demand emerge.

A northeast Asia-based seller offered iso-tank parcels at $2,050/tonne FOB NE Asia, but Asia-based buyers were not interested to purchase material at that price. The seller added that it had started negotiations with buyers in Latin America as Asian demand is weak.

Another producer in northeast Asia said it was firm on maintaining its offer at $2,100/tonne FOB NE Asia for iso-tank parcels even if it does not attract trade discussions or firm bids. Asia-based buyers are not ready to negotiate as they expect prices to slide further, the producer added.

One northeast Asia-based trader offered iso-tank parcels at $2,100/tonne FOB NE Asia to south Asia buyers, who are only willing to purchase at $1,850/tonne CFR South Asia. Both parties failed to reach an agreement, said the trader.

In China, the continual erosion of profit margins has led producers to lower their operating rates, tightening the supply of ECH.

As a result, Chinese prices firmed slightly by yuan (CNY) 200-300/tonne ($31-46/tonne) to settle at CNY12,200-12,700/tonne DEL (delivered) east China for bulk cargoes on 12 July.

However, market sources noted that the slight rebound of ECH prices in China do not reflect an improvement of downstream demand, but rather a reduction in supply.

The standoff between buyers and sellers is likely to end by August as end-user demand is expected to pick up from early August, market participants said.

Buyers are also expected to return to the market as the high season for the downstream epoxy market approaches in September.

ECH is used as an intermediate in the manufacture of epoxy resins.

($1 = €0.71, $1 = CNY6.47)

For more on ECH, visit ICIS chemical intelligence
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Read John Richardson and Malini Hariharan’s blog –
Asian Chemical Connections


By: Gabriel Yip
+65 6780 4359



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