Europe November epoxy resins contracts likely to settle lower

30 October 2013 14:02  [Source: ICIS news]

LONDON (ICIS)--The European November epoxy resins contract price is likely to settle lower compared with October, despite many producers seeking either an increase or a rollover, reflecting market fundamentals and the settlement of primary feedstock propylene at a fall of €30/tonne ($42/tonne), sources said on Wednesday.

The epoxy resins market is currently long due to a combination of structural overcapacity in Europe and a sharp increase in cheap imports from northeast Asia caused by the region's own overcapacity and favourable foreign exchange rates.

Demand is also starting to decline, in line with the seasonal slowdown around the Christmas holiday period, as buyers seek to de-stock.

One producer said it would be looking for a much-needed increase in November to try and bolster recently squeezed margins, but noted that this would likely be difficult and is anticipating a rollover. Another producer said it would be seeking a rollover.

Buyers, however, said they would be seeking a significant reduction, above the drop in feedstock propylene, citing a long market and weak demand. Buyers are seeking a November reduction in the region €30-100/tonne.

One producer said competition is stepping up between domestic European producers and imports and it expects further margin pressure.

"Volumes [from South Korea] are increasing very rapidly. Everybody in the industry agrees it is too quickly, too aggressive. It's influencing our sales more than changes in demand. Looking ahead, everyone will try to get some of the market share back. That means further decreasing margins and margins are currently horrible.”

“I would not be surprised if other companies shutdown," it added.

Another producer, based in the Middle East, said: "I don't know a single epoxy producer making a profit at the moment. South Korean free trade has destroyed the European recovery. It's like a ravenous tiger in the house, the next three months will be more of the same."

Nevertheless, other producers are understood to be considering shutting down operations. A UK buyer said: "Supply is outstripping demand, the big boys are trying to stimulate demand by threatening to close plants, but no one has done it yet. It [the market] needs a big plant to shut down."

Despite lower prices, several buyers are also struggling, citing lower demand from macroeconomic weakness, particularly affecting some of epoxy resins largest markets - construction, automobiles and coatings.

The buyer expects prices to fall or to remain at current levels for at least the next six months. "We don't see the situation getting any better. October was abysmal. There is still a lot of nervousness out there."

($1 = €0.73)

By: Iain Packham

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