23 April 2013 16:48 [Source: ICIS news]
LONDON (ICIS)--Epoxy resins contract prices could roll over in May because of weak demand and oversupply and also because feedstock costs dropped in April, sources said on Tuesday.
The price of feedstock propylene fell by €50/tonne ($65/tonne) and the price of benzene by €62/tonne in April. The cost of epichlorohydrin (ECH) went up in April, but this will have little influence on epoxy resins prices in May.
The market in Europe is described as oversupplied and demand is not showing signs of improvement even as the weather is becoming warmer and construction projects are switching to full throttle.
Sales to the automotive industry are slow because of falling manufacturing output and declining car registrations.
Some buyers are bidding for a reduction but sellers are resisting these arguing that they cannot afford to lower prices even though feedstock costs dropped in May.
According to one buyer, feedstock-integrated epoxy resins producers are in a much better situation now than they were at the beginning of the year, so poor margins should not be used as an excuse to keep prices high.
Two producers expect May discussions will be a struggle as buyers are bidding for a reduction or a rollover, which will be difficult to meet.
According to a producer in western Europe, sales in southern Europe are "terrible" and the outlook is very gloomy especially in Italy and Spain where competition from Saudi Arabia has become very tough in recent months.
Demand in southern Europe in the first quarter is down by about 20% compared with the same quarter last year. Offtake from the paint and construction industries is especially worrying, and this is unlikely to change during the third quarter when most derivative producers shut down for annual maintenance.
Contract discussions will begin next week after feedstock settlements.
($1 = €0.77)
Follow Janos Gal on Twitter @janosgalICIS
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