The weekly Ethylene dichloride report is a global report encompassing updates from Asia, Europe and the US.
Each region provides news and market intelligence on upstream developments, production, demand and any other influencing factors. All areas focus on spot prices with quotes published for NWE, USG and NE Asia. The data and commentary provides you with a reliable source of independent information essential for making business decisions within this area of the industry.
Updated to Q2 2020
Supply lengthened considerably in Q2. Many countries such as India closed their borders in March to control the coronavirus pandemic, resulting in the cancellation of contractual volumes. Contractual shipments did not resume until after the lifting of lockdowns in late May/June. Supply subsequently remained long for much of the quarter, but has been normalising since June.
Lockdowns in various Asian countries remained in effect for much of Q2, stifling trade and adversely affecting demand. Demand started to improve in end-April from China, as buyers from the country took advantage to procure EDC imports earlier than most other countries. This was followed by improving demand in southeast Asia in May.
EDC output fell in Q2 as many producers lowered capacity utilisation in the face of reduced downstream demand. Demand for downstream PVC fell as a result of lockdowns caused by the coronavirus pandemic. As a result, EDC supply fell and there was little spot availability in Q2. Output of upstream chlorine also fell significantly in April and May.
EDC demand fell in Q2 on the back of weakness in downstream industries and lower utilisation rates. Downstream demand for PVC fell in the face of lockdowns across the region, which reduced activity in the construction industry and other major outlets for PVC. As a result, demand for EDC was also lower although this was counterbalanced by reduced operating rates.
The advent of coronavirus lockdowns cut demand for PVC and, in turn, EDC, PVC’s upstream precursor feedstock. US producers got rid of the EDC already in stock with massive export volumes to Asia, where local economies were emerging from coronavirus lockdowns. Supply of US EDC in May and June was extremely tight for spot export availability and few transactions were recorded. EDC production rates began to rebound in May, but only to the extent that it supported slowly recovering demand and production of PVC.
Demand for EDC through the second quarter was lower overall, with a steep crash in April and slow recovery in May and June. PVC demand was brought to an abrupt dropoff in April, but demand for exports to Asia started to emerge in May and EDC demand followed to produce export PVC. Demand had almost returned to normal in late May, but producers calibrated production to match PVC production demands.
Updated to Q3 2020
Supply of Asian material is expected to be limited by a major northeast Asian producer’s turnaround from mid-August to mid-September. An uptrend in Asia’s feedstock ethylene prices since April has far outpaced gains in EDC and downstream PVC. Coupled with a sluggish demand recovery for chlorine co-product caustic soda, this may cause integrated producers to adjust operating rates on high production costs and squeezed margins.
Buyers in China are expected to remain in the market for further imports, as high feedstock ethylene prices make it economical for vinyl makers to buy EDC for PVC production. Some market participants remain cautious, as the onset of India’s monsoon season is expected to cap downstream PVC demand. Any sustained uptrend for vinyl end-use could also be curtailed on the possibility of a second wave of the virus.
EDC supply is expected to slowly increase in Q3 as downstream demand surges and utilisation rates rise. Utilisation rates were low in Q2 as producers adjusted to weak demand for downstream PVC. With demand recovering following the lifting of coronavirus related lockdowns, utilisation rates are likely to rise in Q3.
EDC demand is likely to increase in Q3 as the effects of the coronavirus pandemic fade. Lockdowns across Europe reduced demand in downstream PVC as a result of lower activity in the construction, automotive and general consumer sectors. In Q3, these effects are no longer expected to be in place. However this outlook is tempered by the upcoming holiday season in July and August which is likely to reduce activity.
Supply of US EDC is expected to continue to return toward near normal levels during the third quarter along with emerging demand recovery for downstream derivative PVC. Summer is peak demand season for US PVC and apparent EDC supply appeared poised to rise to support the recovering PVC production to meets it demand increase.
EDC demand is expected to rise through the third quarter to meet recovering demand for the manufacture of PVC in its peak demand season. The rise in PVC demand and higher chlorine production is also expected to make more EDC available for spot market sales. Buyer caution and project completions may put a ceiling on PVC demand near the end of the third quarter.
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Ethylene dichloride (EDC) is a clear, colourless, oily liquid with a sweet, pleasant chloroform-like odour. It is highly volatile, toxic, flammable and miscible with chlorinated hydrocarbons and most organic solvents. It reacts violently with aluminium, alkali metals, alkali amides, ammonia, bases, strong oxidants and attacks many metals in presence of water.
Around 95% of EDC is used in the production of vinyl chloride monomer (VCM), nearly all of which goes into polyvinyl chloride (PVC).
Other outlets for EDC are chlorinated solvents such as ethyleneamines, trichloroethylene, vinylidene chloride and trichloroethane. It is used as an intermediate in the production of perchloroethylene (tetrachloroethylene) and as a catalyst in hexachlorophene production.
EDC has been used as a solvent in the textile, metal cleaning and adhesives industries. Solvent markets tend to be mature due to environmental pressures to reduce emissions and declining in the case of perchloroethylene.
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It has been a tough period for chlor-alkali producers as recent months showed a sharp downturn in margins for caustic soda. This scenario threatens to bring to an end the period of strong margins, despite some signs of a limited rebound earlier in Q4 2019. Across all major markets, calculated margins based on the co-production of caustic soda and ethylene dichloride (EDC) have weakened substantially since October 2018.
Like many others, if you are looking for ways to unveil answers to key industry questions then come and join us at the 24th World Chlor-alkali Conference organised by ICIS and Tecnon Orbichem. This 1.5 day event has been a home for key industry players in the value chain, having welcomed hundreds of delegates each year. Take a first look at the key offerings in 2020.