Price and market trends: Huntsman mulls rationalisation in liquid epoxy resins

22 February 2013 10:20  [Source: ICB]

Producers are feeling pain and capacity rationalisation is set to take place. But US February prices rise

US-based Huntsman is considering rationalisation in its basic liquid epoxy resins, its CEO said, the latest head of a company who expressed pessimism about the prospects of the industry.

Huntsman's liquid epoxy resins (LER) business falls under its advanced materials segment, which also produces solid epoxy resins, specialty resin compounds and formulations based on epoxy, acrylic and polyurethanes.

For basic liquid resins (BLR), "there is a sense in the industry that so many people are hurting, the capacities will be rationalised. We're evaluating some of our own capacity as part of that exercise", said Peter Huntsman, the company's CEO, during an earnings conference call on 12 February.

The commodity BLR business is at historical lows, the CEO said. However, other parts of the company's advanced materials segment are doing well, he said.

For 2012, the company's advanced materials segment reported revenue of $1.33bn (€998m), down almost 3% from $1.37bn in 2011.

The segment reported $92m in 2012 adjusted earnings before interest, tax, depreciation and amortisation (EBITDA), down around 17% from $111m reported for 2011.

Huntsman was not alone in his gloomy outlook for liquid epoxy resins. Just weeks ago, Dow Chemical's CEO said the world has too much epoxy resins capacity, and some companies will likely take some of that capacity off line.

"On epoxy, the Chinese just overbuilt - that plus the Taiwanese and the Koreans," said Dow CEO Andrew Liveris on an earnings conference call.

"Epoxy will continue to be oversupplied, and frankly, there needs to be capacity taken out. Capacity will need to come out," Liveris said. "We've done some of it, and others will do it as well."

Meanwhile, US prices for domestic epoxy resins increased for material shipped in February, sources said on 12 February.

Buyers and producers said much of the market accepted price-increase nominations of 6 cents/lb ($132/tonne, €99/tonne) on supply concerns and slightly improving demand.

"Smaller buyers are being forced to buy domestic to ensure supply security," a buyer said. "So prices go up."

Several larger buyers said they were able to push back on February price-increase nominations, as they are still using less expensive imports as a key source of material.

"We didn't take anything in February," another buyer said. "Supply has been good; there's no issue getting material."

However, several larger buyers reported prices for February in the low-$1.40s/lb on a DEL bulk (delivered in bulk) basis.

This would be up from prices for January material, which were assessed by ICIS at $1.38-1.45/lb.

With the February increases taking effect, ICIS-assessed prices for US domestic epoxy resins moved to $1.44-1.51/lb DEL bulk, consistent with reports from most buyers.

Author: Al Greenwood and John Dietrich

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