Europe ECH market to stay healthy despite downstream instability

LONDON (ICIS)–The European epichlorohydrin (ECH) market looks likely to continue using propylene as its key feedstock despite supply pressures, sources said on Tuesday.

Participants have returned to find market fundamentals looking balanced following the winter break.

Prices are yet to be determined for January contracts as negotiations and settlements are unlikely to be reached until next week at the earliest.

Towards the end of the first quarter there could be pressure upstream, as cracker turnarounds could squeeze supply of propylene.

Although this may have an impact on production costs, propylene will remain the preferred raw material for many buyers instead of alternative feedstock glycerine.

While glycerine can be used to produce ECH, some have stated changing production methods alters the end product, which is not as desirable as propylene-based material.

“I think the cracker shutdowns will have an impact on European players, because we all depend on propylene, but it still remains to be seen what is happening in Asia,” said one source.

“If propylene in Asia remains at a lower level, Asian producers could have a competitive advantage, although the main competition will continue to be epoxy resins from Asia.

“ECH made with glycerine is also available, but the dominant form of ECH will remain the propylene-based one, and this will continue to set the prices, so I don’t think it will be that significant,” it added.

There is the potential for ECH prices to be pulled away from tracking raw materials early in the year, which would allow producers to build on stable margins.

Although propylene saw decreases of €35/tonne in January contract settlements, ECH prices could be settled at a rollover depending on the strength on demand.

There could be some resistance to this as the epoxy resins market appears weaker in a year-on-year comparison, as prices look likely to decrease rather than climb as they did in January 2018.

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.

Focus article by Morgan Condon.

Picture source: Perry Mastrovito/imageBROKER/REX/Shutterstock