China domestic ECH slumps 13% over 3 weeks; may extend falls

Focus story Matthew Chong

SINGAPORE (ICIS)–Spot domestic epichlorohydrin (ECH) prices in China posted heavy losses for the third straight week amid availability of cheaper glycerine-based material in the market and weak demand, industry sources said on Thursday.

Prices may continue falling after the Chinese holiday on 1-7 October, especially if major producer Shandong Haili decides to restart its Jiangsu plant.

China’s markets are closed for the week-long celebration of its National Day.

Domestic ECH prices fell to an average of yuan (CNY) 10,950/tonne ($1,783/tonne) DEL (delivered) east China on 30 September, down by a cumulative 13% from three weeks ago, according to ICIS data.

Most buyers in downstream epoxy resins market have sufficient ECH inventory, given reduced average operating rates of 50-60% or lower at some liquid epoxy resins (LER) plants that do not produce their own feedstock, market sources said.

LER plants with captive feedstock production, on the other hand, are running their facilities at 80% of capacity.

Demand coming from the solid epoxy resins (SER) sector will also be weak as some of these facilities are expected to be shut in the first week of October for the holidays, they said.

ECH price movement also hinges on whether or not Shandong Haili will restart its 130,000 tonne/year plant at Yancheng in Jiangsu province. The plant has been shut since 25 July.

But ECH prices are likely to find support at around CNY10,000/tonne DEL east China because of cost of propylene, which is the more common feedstock for ECH production, market sources said.

Propylene-based ECH producers’ margins would be tightly squeezed if prices were to fall near CNY10,000/tonne levels, they said.

Other market participants, however, are upbeat that prices could increase once the backlog of lower priced glycerine-based ECH stock is cleared, provided that Shandong Haili’s Jiangsu plant does not restart in October.

Available glycerine-based ECH in the market increased in recent weeks after major producer Jiangsu Yangnong Chemical raised the run rates at its 90,000 tonne/year plant in Yangzhou to 70% from 50% previously.

Another glycerine-based ECH plant with a 30,000 tonne/year operated by Ningbo Huanyang has increased operating rates to 70-80% from 60%.

Glycerine is a cheaper feedstock, compared with propylene, for the production of ECH.

A tonne of ECH requires roughly 600-700kg of propylene, or 1.1-1.2 tonnes of glycerine.

Recent ECH plant start-ups in China use glycerine as feedstock.

Meanwhile, ECH import prices into China fell at the low end of the range for the second consecutive week to $1,620-1,700/tonne CFR (cost and freight) CMP (China Main Port), as buyers’ appetite for import cargoes diminished, in line with declining domestic ECH prices.

Regional producers, however, have kept their offers firm, with some hopeful of a rebound in China’s domestic ECH prices after the holidays.

($1 = CNY6.14)

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