OUTLOOK ’12: US epoxy resins market facing mixed expectations

30 December 2011 17:00  [Source: ICIS news]

HOUSTON (ICIS)--The epoxy resins market is expected to be a relatively good place to be in 2012, with growth projected at gross domestic product (GDP) plus 1-2%.

However, with concerns and worries that the global economy will experience weakness during the year, there might not be any good places to be.

Such is the situation facing US epoxy resins market players, sources said.

“We’re at the mercy of the global economy, and that’s not an encouraging prospect,” a buyer said.

Market players are divided on how 2012 will start for epoxy resin demand. Some producers said they expect orders to start flowing in January, as inventories will need to be rebuilt.

“January is going to be crazy,” a producer said. “Right now, no-one wants to be stuck with a single pound but, once 2012 starts, the orders will start flowing.”

Another producer said demand remained stronger year on year throughout 2011, showing that underlying demand is strong.

However, buyers were more pessimistic, pointing to weakness in almost every market except for the automotive coatings and oilfield resins markets.

“Demand is off and customers are getting more cost-conscious and cost-efficient,” a buyer said.

Buyers also pointed to a trend that grew throughout the third and fourth quarters of 2011 - cheaper imports.

Buyers said that, so long as epoxy resin supply in Asia remains long, Asian producers and distributors with Asian material will continue to look to the US to sell product.

This was a major factor that pushed down US market prices throughout most of the second half of 2011.

Domestic prices fell by 15%, a drop of 27–29 cents/lb ($595–639/tonne, €458–492/tonne), from the end of May until mid-December. On 31 May, domestic prices were $1.80-1.86/lb.

Import prices fell by 21%, a drop of 39–41 cents/lb in the same period.

“With all the export pressure on the US, there’s no room for prices to move higher,” a buyer said. “I wouldn’t expect to see any increases until March or April at the earliest.”

A buyer said further price decreases were expected before the close of 2011 and into 2012 as producers look to lock down prices.

“Suppliers are willing to lock up quarter pricing due to the fear that pricing will continue to plummet into the first quarter,” the buyer said.

Other buyers argued that prices could stabilise at the start of 2012 on expected plant turnarounds in the US and Asia.

“There are always plant turnarounds at the start of the year,” one said. “And China goes through a quick turnaround after the New Year over there.”

Upstream, feedstock prices for bisphenol A (BPA) and epichlorohydrin (ECH) will also be major factors in the epoxy market.

BPA prices are expected to stay low because of long supply and soft demand in the phenol-acetone chain. However, the potential shutdown of Sunoco’s 545,000 tonne/year cumene unit at its Philadelphia refinery in Pennsylvania could tighten the US phenol-acetone market, pushing BPA prices up.

For ECH, prices are expected to be high at the start of 2012, and perhaps throughout the year, after the explosion on 13 November at Tosoh’s Nanyo chlorvinyls plant in Japan.

Major US epoxy resins producers include Dow Chemical, Huntsman and Momentive.

($1 = €0.77)

By: John Dietrich

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