US Aug epoxy seen steady despite long supply

Wind turbines are a major end use for epoxy resins. US contract prices for August will likely roll over despite imports from Asia. Producers meanwhile continue to feel pressure from higher feedstock. (WestEnd61/REX/Shutterstock)

Focus article by John Dietrich

HOUSTON (ICIS)–US August epoxy resin contracts are expected to hold steady from July, but downward pressure remains on the market because of long supply.

Market sources said they expect August contracts to roll over for most of the market, with smaller patches taking some slight declines.

July pricing was assessed down 3 cents/lb ($66/tonne) at $1.11-1.15/lb on a DEL bulk (delivered in bulk) basis.

However, sources said pricing had been slowly trickling down in bits and pieces since February, with no single concerted market-wide decline in any month.

“Pricing is steady for domestics and imports in August,” a US buyer said. “There’s so much capacity that no one can get any increases through.”

The long supply has stemmed mostly from imports from Asia, which have been at a 10-15 cent/lb discount to US domestic product for most of 2016.

The continued competition from Asia has US producers concerned about margin viability.

US producer Hexion said in its Q2 earnings call that base epoxy resin sales were weaker year on year on a margin and volume basis.

The company said that epoxy precursors bisphenol A (BPA) and epichlorohydrin (ECH) had stronger performances.

“Macroeconomic conditions relative to the global economy are not a favourable wind at our back,” a company spokesperson said.

The continued pressure from Asian imports has steadied in the second half of 2016, with buyers saying import volumes are largely near their maximums.

However, the downward pressure remains in August, even as feedstock costs have climbed.

US cumene prices are up 4-5 cents/lb since June. Cumene is upstream of epoxy, BPA/ECH and phenol/acetone, and it represents a good proxy for overall feedstock costs for epoxy producers.

With US epoxy producers having little to no success with price increases, sources said sellers are focusing on keeping pricing mostly steady.

This is keeping margin erosion limited, but the renewed pressure from feedstocks in July and August is hitting epoxy producers.

Demand growth for epoxy resins in August is also up slightly, several buyers have said, and remains higher year on year.

The demand growth, however, has been described as not strong enough to absorb the supply length in the market.

“Demand has picked up in August, but it probably won’t last through September/October,” an epoxy buyer said.

Major US epoxy resin producers include Hexion, Huntsman and Olin.