OUTLOOK ‘18: Europe ECH, epoxy resins markets face pressure from Asia tightness

Source: ICIS News

2018/01/08

LONDON (ICIS)--Tightness in the epichlorohydrin (ECH) and downstream epoxy resins markets in Asia during December 2017 is likely to put pressure on the European markets heading into 2018.

During December, the Asian ECH and epoxy resins markets registered limited availability, which led to rising prices in the region.

This, in turn, meant that Asian producers were choosing to focus on their domestic markets rather than exporting material to Europe.

While European domestic supply was healthy in December, with around 15-20% of the European epoxy resins market relying on imports, according to a source, the situation in Asia is expected to exert pressure on European supply of both ECH and epoxy resins in the first half of 2018.

Another factor which players will be paying close attention to in 2018 is the fluctuating exchange rate, as this can heavily impact the price of imports and exports.

ECHThe ECH market in China is expected to remain very tight for the next three to five months, with tougher environmental regulations from the Chinese government restricting production.

European market players anticipate ECH prices in Europe facing upwards pressure until the second half of 2018 as a result.

Demand in the first quarter of the year is traditionally stronger following de-stocking at year-end.

In 2018, participants expect this buying interest to be bolstered by the Asian tightness, which European sellers anticipate will open up more export opportunities for Europe.

EPOXY RESINSAs well as the tightness in the ECH and epoxy resins markets in Asia, there is also limited availability in the bisphenol A (BPA) market in that region. BPA and ECH are the main feedstocks for epoxy resins.

European producers expect this to put further pressure on the region’s epoxy resins prices, with several buyers and sellers anticipating price increases at the start of the year.

As such, there is some uncertainty surrounding the epoxy resins market in Europe for 2018.

“I don't recall a period where there was such an incredible price gap between Europe and Asia. I would expect European producers to sell into Asia. I have no idea what Q1 will look like next year, and what is the right thing to do, to buy or not,” said a European buyer.

There are several capacity expansions of polycarbonate plants in Asia, which both took place in 2017 and are expected to take place in 2018-19, increasing demand for feedstock BPA.

European players have said that this is likely to reduce the amount of BPA available for epoxy resins production, both in Asia and in Europe.

The European epoxy resins market is expected to hit its tightest point of the year in the third quarter of 2018, with the spring turnaround season compounding the anticipated lower imports from Asia.

Industry players are hoping for strong domestic buying interest in Europe during the first half of next year, with space for growth in construction across Europe expected.

ECH is used in the manufacture of epoxy resins for surface coatings, castings, laminates and adhesives, as well as specialty resins for water and paper treatment.