Asia epoxy resin export offers up on upstream gains; but demand hazy

Author: False

2019/02/12

SINGAPORE (ICIS)--Export offers for northeast Asia-origin epoxy resin cargoes are edging up alongside upstream gains, but upside potential may be capped if downstream demand does not recover sufficiently.

 - Epoxy makers margins eroding as feedstocks gain

 - Feedstock ECH supply to tighten on plant turnarounds

 - Seasonal demand in March-May may support prices

This week, some producers were looking to move up, possibly to the tune of $50-100/tonne, their asking prices for cargoes available to lift in late February/March.

This was necessary to rescue eroding margin, sellers said, given that prices for raw materials like bisphenol A (BPA) and epicholorohydrin.(ECH) have climbed in recent times.

Average BPA prices had gone up by more than $100/tonne within a month, closing at an average of $1,395/tonne CFR (cost-and-freight) China on 8 February, according to ICIS data, compared to just $1,250/tonne at the start of the year.

ECH prices have firmed too, as spot availability is drying up in view of various upcoming plant shutdowns in the region, including the 100,000 tonne/year Formosa Plastics plant in Taiwan that will go off-line from mid-February to early March, and another 60,000 tonne/year line in South Korea that will shut from mid-March to end-April.

Epoxy resin sellers are also banking on a typical seasonal surge in epoxy resin requirements during the March to May period, especially from the downstream construction and automobiles sectors, to support their higher asking prices.

Although buying of epoxy resin has been "sluggish" for some time, a producer acknowledged, "downstream users would have to buy again at some point to replenish stocks before the seasonal demand sets in".

On 8 February, average epoxy resin prices edged up slightly to $2,475/tonne FOB northeast Asia, supported by a bout of active re-stocking purchases in the region before China shut for the extended Lunar New Year holidays from 4-10 February.

Earlier, ICIS data shows that prices had declined steadily, down to nearly $2,400/tonne FOB (free-on-board) northeast Asia on 1 February, from a high of $3,000/tonne FOB northeast Asia a year ago.

That said, it remains to be seen if the anticipated seasonal demand hike would materialise this year sufficiently to warrant sustained increases in epoxy resin prices.

Likelihood that such demand may be derailed cannot be dismissed, market participants said, judging from the sombre mood in various key downstream markets such as automobiles.

Latest statistics showed that China registered a near-3% year-on-year decline in car sales in 2018, and in India, December vehicle sales also fell 3% from the month prior.

Epoxy resin is used heavily in applications like metal adhesives, coatings, construction and automobiles.

Demand would also hinge on how the US-China differences on trade issues would pan out, "especially now that the 1 March expiry for the truce agreement is drawing near”, a trader said.

As long as there is no clarity on how ongoing US-China trade talks may land, an end-user said he will “continue to go slow on purchases” of raw materials including epoxy resin.

Bids are therefore likely to stay muted in the time being, which could serve to dent the budding and buoyant pricing sentiment among epoxy resin sellers, market participants said.

9112DC8DDC1F8681B191424E4A72C1F0.jpg(Top image: epoxy-putty-Sipa-Press-REX-Shutterstock)

Focus article by Ai Teng Lim