China domestic ECH prices fall, future outlook unclear

Matthew Chong

19-Sep-2014

ECH is used in making durable coatings for pipes, appliances, as well as for food and drink cansFocus story by Matthew Chong

SINGAPORE (ICIS)–China domestic spot epichlorohydrin (ECH) prices having maintained an uptrend recently corrected by nearly 5% from the previous week to an average of yuan (CNY) 12,000/tonne this week, market sources said on Friday.

ECH prices on east China DEL (delivered) bulk basis have eased for five straight sessions by an accumulative 7.7%, after hitting a ceiling at an average of CNY13,000/tonne on 19 August, according to ICIS pricing data.

Before reaching its peak, the prices had spiked by 31% in just a month between July-August because of persistent tight supply in the China market due to plant shutdowns since late July.

However, largely stable downstream epoxy resins demand was unable to support sky-high ECH prices for a sustained period of time, market participants said.

Shandong Haili – the largest ECH producer in China and Asia – has quashed speculations on whether its 130,000 tonne/year plant in Yancheng, Jiangsu would restart within the month.

A company source said that the plant – shut since late July – was unlikely to restart in September. However, the exact restart date of the plant remains unclear.

To make up for the lost production from the shutdown of the 130,000 tonne/year plant, the company restarted one of its two idled 80,000 tonne/year ECH line at Zibo, Shandong ,in end-July, the company source said.

The company has four 80,000 tonne/year lines at the Shandong site with the three lines now running at an average of 80% capacity while the fourth line remains idle, the source said.

“The restart of their (Shandong Haili’s) third line does not make up entirely for the output lost [from Haili’s Jiangsu plant shutdown], a northeast Asian producer said.  

Before end-July, Shandong Haili accounted for roughly 60% of China’s total ECH production; with its 130,000 tonne/year plant in Jiangsu and two operating 80,000 tonne/year lines in Shandong, industry sources said.

As a result of the delay in the Jiangsu plant restart, most market participants think that ECH prices may be able to hold up at CNY12,000/tonne, at least until the end of the month.

“Whether [domestic ECH] prices could sustain at CNY12,000 [/tonne DEL east China bulk] depends a lot on when Haili will restart its [Jiangsu] plant,” said a China-based epoxy resins producer who is also an ECH buyer.  

As Shandong Haili did not comment much on their plant operating schedules, market opinions were divided on when the company’s Jiangsu unit would resume operations, with some speculating that it is likely to restart in October after the golden week holiday in China from 1 to 7 October, while others foresaw that it is unlikely to restart anytime soon.

“The overall output from glycerine-based plants has increased after the spike in [domestic ECH] prices but not substantially Because glycerine-based plants are not able to ramp up to near full production due to technical issues and also because the [Chinese] authorities are clamping down hard on environmental pollution,” said the same China-based epoxy resins producer.

Jiangsu Yangnong Chemical has increased the operating rate at its 90,000 tonne/year Yangzhou, Jiangsu plant to 70% capacity after having run at reduced rates of 50% or less in the second-half of August.

It had to cut the operating rate because of government restrictions on pollution on plants as well as transportation in the areas surrounding Nanjing when the Youth Olympic Games (YOG) were held in Nanjing from 16-28 August.

Jiangsu Yangnong Chemical is a major ECH producer that uses glycerine as feedstock rather than the more commonly used and higher-cost propylene, used by Shandong Haili and most other northeast Asian producers outside China.

“We do not intend to increase our operating rates further [from 70%] because there is not much improvement in epoxy [resins] demand,” the producer said, adding that its plant used to be running at around 60% before the spike in prices.    

While there have been a sprout of new glycerine-based plant start-ups and expansions in China in recent years, these plants have either remained idle or were running at low rates because of Overcapacity in the country.  

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

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