FocusAsia export of epoxy resins to Europe set to grow on price gap

02 September 2013 07:05  [Source: ICIS news]

(recasts paragraph 4-6 for clarity)

chemical tankerBy Matthew Chong

SINGAPORE (ICIS)--Shipments of Asian epoxy resins cargoes to Europe are likely to grow further through to the end of this year, as European buyers seek to capitalise on cheaper imports of the material from the Asia Pacific, industry players said on Monday.

Asian spot liquid epoxy resins (LER) prices have been rangebound at $2,500-2,670/tonne (€1,900-2,020/tonne) FOB (free on board) northeast Asia for the past four weeks, according to ICIS data.

The high end of the price range represents concluded deals from South Korea to Europe.

South Korean cargoes are able to fetch higher price because of the FTA with Europe, whereas for countries with which Asian countries do not have a FTA, the LER producers have to offer lower prices because taxes have to be paid on them, according to market players.

Epoxy resins imported to Europe from Northeast Asia are offered at $3,000/tonne FD NWE, compared with spot offers in Europe at around $3,100/tonne FD NWE, representing a $100/tonne premium over imported material from Asia.

Meanwhile, according to ICIS, the European August monthly contract price is at about $3,400/tonne FD NWE which may be subject to discounts depending on contract terms.

South Korean producers are likely to be the main beneficiaries because of the FTA between South Korea and Europe as well as the US, they said.

Although the price gap between Europe and Asia has stabilised and has shown signs of narrowing in recent months, export volumes to Europe are still expected to increase in the next few months, traders based in Asia said.

Major US producers of exoxy resins have already reduced their prices to better compete with Asian prices and some European producers have also lowered their prices to some extent, but not to the level of Asian prices because of high production costs.

“Dow Chemicals and Momentive reduced their prices in the US by $100/tonne recently in the face of stiff competition from us,” said a northeast Asian producer.

Because of lacklustre demand in Asia in an oversupplied market, exporting to Europe seems to be a lucrative business for South Korean suppliers at the moment, according to market players.

Demand has been lacklustre in Asia since the second quarter of the year, they added.

While downstream demand from paint coatings remains relatively stable, consumption from the electronics sector - a major user of epoxy resins - has been weak this year.

The currency depreciation in some developing Asian countries, such as Malaysia, Thailand and India since June this year, further escalates the problem as demand for imports diminishes.

Asian producers are able to sell at lower prices than their European counterparts because of lower production costs. Besides having lower labour, energy and feedstock costs, Asian plants operate more efficiently as they are newer and technologically more advanced, according to a South Korean producer.

“Our products are of better quality in terms of both colour and consistency,” he added.

Although the price difference between European and Asian cargoes has generated increased demand for cheaper Asian imports, there have been no strong signs to indicate that global demand is picking up, according to market sources.

September to October used to be the end-user demand peak season for epoxy resins, mainly used in the production of consumer electronic goods for the Christmas season, but demand recovery after the summer holidays has been slower-than-expected this year, according to most Asian suppliers.

“There are no new innovative smartphones or LED TVs being introduced into the market recently and that is why we are not seeing the usual spike in demand for epoxy resins used in electronic products this year,” a Taiwanese supplier said in Mandarin.  

“The sales of high-end electronic products in developing countries has also slowed down even though the penetration rate of say, smart phones in India is very low,” he added.

The price gap between Asian and European material has been widening from August 2012 to February this year, according to ICIS data. (please see chart below)

From March 2013, Asian prices have been on a gradual but slow downward trend.

European prices have been trying to play catch-up with Asian prices but European suppliers’ margins are already being squeezed to the limit, according to industry sources.

The current price at $3,370-3,430/tonne FD NWE in the week ended 27 August is probably the lowest they could go without incurring a loss, according to industry players.   

($1 = €0.76)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Matthew Chong
+65 6780 4327

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