Chemical Profile: Asia epoxy resins

12 July 2013 17:35  [Source: ICB]

USES
Epoxy resins are versatile polymers that have high chemical and electrical resistance and outstanding adhesion, as well as durability at high and low temperatures, and they can also be poured or cast without forming bubbles. These attributes make epoxy resins useful in encapsulating electrical and electronic components.

 
In the construction industry, epoxy resins are the preferred materials for non-slip, easy to clean surfaces and are the adhesives of choice due to their excellent adhesion to steel and concrete. Epoxy resin adhesives can be used on metals, construction materials and most other synthetic resins.

Epoxy resins are also used in industrial and maintenance coatings in oil and gas pipelines.

They are also strong enough to be used in place of rivets and welds in certain industrial applications. Other applications include automotive, aircraft and civil engineering and packaging.

SUPPLY/DEMAND
Epoxy resins global market growth is expected to continue to follow global GDP growth, give or take 1%, as it did in the past, according to industry sources. It is highly related to global GDP growth because its applications are varied, spreading across many industries and widely found in end-user products.

On the supply front, Taiwan's Chang Chun Plastics expects to start its new 50,000 tonne/year epoxy resins plant at Panjin, northeast of China, in July, adding on to its current capacity of 100,000 tonne/year epoxy resins plant at Changshu, southeast of China. Material from its China plants serves both the domestic China market and export market.

The additional supply will add to the already oversupplied market. The China market continues to be oversupplied, resulting in many Chinese epoxy producers operating their plants at or below 50-70% capacity. Other producers in northeast Asia have largely maintained their operating rates at above 70-90% capacity.

Challenges remain for suppliers to overcome tightening margins from stiff competition amid global weak demand.

Northeast Asian material is sold to various regions including Asia, Europe and the US. Global demand for epoxy resin was weak in the first half of the year. In general, end-users of epoxy resins from the various downstream sectors such as the automobile, marine, electronics, continue their buying pattern from the previous year, on a need-to basis. The slow recovery of the global economic situation and the lack of firm positive signs in the key economic indicators in the US, Europe and China markets, continue to weigh down on buying sentiment.

PRICES
Prices for Asia epoxy resin largely shadow the weighted average of the prices of its feedstock bisphenol A (BPA) and epichlorohydrin (ECH), with slightly more weightage on BPA prices since more BPA is used in the production of epoxy resins.

In the first-half (1H) of 2013, Asia epoxy resin prices fluctuated within $2,500-2,700/tonne FOB (free on-board) NE (northeast) Asia, following the price trend of feedstock BPA since co-feedstock ECH prices were relatively more stable.

Asia epoxy resins prices were assessed at $2,530-2,670/tonne FOB NE Asia for the week ended 2 July. July offers were lowered from June offers following the recent falls in feedstock BPA prices.

More worthy of note is that South Korean material enjoys zero tariffs under Free Trade Agreements (FTAs) for trade with Europe and the US starting from July 2011 and March 2012 respectively.

The bulk of the South Korean epoxy resins were sold to Europe in 1H 2013, as prices on a FOB basis were higher than if sold to the US and Asia markets. South Korean trade to Europe was more significant than trade to the US, in terms of price and quantity, despite having a FTA with both Europe and the US. This was because of more supply interruptions by domestic suppliers in Europe amid plant shutdowns because of schedule maintenances and weak demand and margins.

Meanwhile, other northeast Asian material prices on an FOB basis were largely similar for cargoes to the various destinations.

TECHNOLOGY
Epoxy is a copolymer formed from a resin and a hardening chemical. Most common epoxy resins are produced from a reaction between epichlorohydrin (ECH) and bisphenol A (BPA), though the latter may be replaced by similar chemicals.

The hardener consists of polyamine monomers, such as triethylenetetramine. When mixed together, the amine groups react with the epoxide groups to form a covalent bond. The resulting polymer is heavily crosslinked, and is thus rigid and strong.

Curing through polymerization can be controlled through temperature and the choice of resin and hardener compounds. The process can take minutes to hours.

Some formulations benefit from heating during the cure period, whereas others simply require time and ambient temperatures.

OUTLOOK
Market players expect demand to slow down in the coming weeks amid summer vacations in Europe and Ramadan and upcoming Eid Ul-Fitr festival largely observed in the Middle East and parts of Asia.

Market outlook till the end of the year is uncertain and lacks optimism.

The recent fall in feedstock BPA prices because of weak downstream sectors in polycarbonate (PC) and epoxy resins further dampened sentiment in the epoxy resins market, while co-feedstock ECH market has been largely stagnant without support from the epoxy resins sector since epoxy resins is the main downstream use of ECH.

Market participants largely do not foresee a pick-up in demand within 2013 amid a weak global economy. However, market players said that prices of epoxy resins and its feedstock BPA and ECH have already bottomed out. They added that prices may soften, but are unlikely to drop significantly.


By: Hazel Goh



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