Europe November ECH contract prices set to fall

30 October 2013 15:23  [Source: ICIS news]

LONDON (ICIS)--European November contract prices for epichlorohydrin (ECH) are likely to settle lower than in October, reflecting falling demand, significant oversupply stemming from cheap imports from Asia and a €30/tonne ($42/tonne) drop in the feedstock propylene contract, sources said on Wednesday.

Demand is currently low due to macroeconomic weakness which is affecting ECH’s key markets and is likely to fall further in the seasonally quiet Christmas holiday period.

One producer said it was hoping to split the November €30/tonne drop in propylene with customers and said it could accept, at the very most, a €20/tonne decrease, which it considers a worst case scenario.

A UK distributor said it would be seeking a reduction in the range of €30-40/tonne for November.

Buyers, however, indicated they would be seeking a reduction anywhere in the region of €10-100/tonne. One buyer characterised the market as very long and demand as weak. “I guess the price will go down by minimum €50/tonne, maybe €70/tonne maybe even €100/tonne,” it said.

Large amounts of cheap product have been flooding the market from Asia, particularly South Korea, benefitting from favourable exchange rates as the US dollar weakened against the euro.

With exchange rates now appearing to settle and re-balance, there is some expectation that the influx of cheap imports could start to dry up or European producers could start to fight back on a price basis.

A European producer said: “Now things are stabilising a little bit. The feeling I get from European producers is that they are ready to fight back, start resisting. There’s more of a will to stop the increase of cheap import flows.”

Nevertheless competition is fierce and some producers expect consolidation. “If we stay on current levels, small margins and unexciting volumes, the question is when could the market reconsolidate. It could be 2014,” one said.

It added: “It might be enough to have one large player in Asia and one in Europe stepping out. Either a big player or several smaller players need to step out.”

($1 = €0.73)

By: Iain Packham

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