OUTLOOK ’18: China BPA to gain support from tight supply, strong demand

SINGAPORE (ICIS)–China’s bisphenol A (BPA) prices are likely to gain upward momentum in the coming year from strong downstream demand and tight availability of spot supply in the domestic market.

In 2017, domestic BPA prices moved upwards in the first two months driven by increased restocking activities prior to the Chinese Lunar New Year and higher feedstock costs.

During March-September prices were range-bound at yuan (CNY) 9,000-10,000/tonne before taking a spike in the fourth quarter following the anti-dumping measure on Thailand-origin imports.

Looking into 2018, most market participants were bullish about the industry, citing capacity expansion in downstream polycarbonates (PC) units and expectedly lower imports from Thailand.

Thailand’s PTT Phenol has cut notably cargo deliveries from its 150,000 tonne/year BPA plant in Map Ta Phut into China following the imposition of a 10.1% temporary deposit on Thailand-origin BPA cargoes on 9 November, based on initial findings of an ongoing antidumping probe on imports.

The investigation was launched in March and will continue for a year.

As of October 2017, Thailand-origin cargoes accounted for about 38% of China overall BPA import volumes, according to China Customs data.

Additionally, the expectation of high feedstock phenol costs will also provide some support for the BPA market in China as tighter domestic supply is likely to send phenol prices higher next year.

In terms of imports China is expected to receive fewer cargoes from the US where Shell plans to idle its 240,000 tonne/year Phenol 3 unit at its Deer Park facility in Texas, in mid-January 2018.

Meanwhile, demand for BPA will get a boost from the rapidly growing PC production capacity in China because of tight domestic supply and lucrative margins.

Around 400,000 tonnes/year of new PC capacity will come on stream by end-2017 and next year, which is expected to increase BPA consumption by about 30,000 tonnes per month.

However, some market players are concerned that BPA demand would be dampened by the other major downstream product – epoxy resins.

Operation at domestic epoxy resins plants has been unstable this year due to environmental inspection.

Epoxy resins producers will be put under great cost pressure as the Chinese government plans to start imposing environmental protection duties on them from 2018, while prices of another feedstock epichlorohydrin (ECH) are likely to stay high amid tight spot availability.

That said, with healthy demand for epoxy resins from the electronics and coating industries, the rising feedstock costs can be passed onto the downstream markets.

Coating output in China is expected to increase by around 7% to over 20m tonnes in 2017, according to forecast made by China National Coatings Industry Association.

Meanwhile, the added value of China’s electronics and information manufacturing industry grew 12% in the first eleven months of 2017, 3.7 percentage points higher than the country’s industry average, according to statistics released by China Electronic Information Industry Association.

BPA is predominantly used in the production of epoxy resins, which represent almost 55% of BPA consumption. Epoxy resins are widely used in electronics, adhesives and coatings.

Polycarbonates are the other main downstream market for BPA, accounting for around 43% of BPA use, with a wide range of applications in packaging, medical and healthcare applications, electronics and uses in the construction and automotive sectors.

Outlook article by Jady Ma

ICN