Asia epoxy resins demand stays limp on weak downstream production

Author: Ai Teng Lim

2020/07/29

SINGAPORE (ICIS)--August trade for Asian epoxy resins is poised to stay under pressure, as concrete and even downstream production recovery still seems a remote reality despite some upbeat economic data in China.

Average export prices for northeast Asia-origin epoxy resins fell by another $25/tonne to hit $2,025/tonne FOB (free on board) NE (northeast) Asia on 28 July, according to ICIS data.

Current prices are down by more than 11% from the last peak of $2,280/tonne FOB NE Asia achieved in mid-June, and the lowest epoxy prices have slipped to since September 2017, based on the data.

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“But it seems things have not hit bottom yet,” a trader cautioned, noting that the downside impact of a sharp 18% loss within July for prices of feedstock bisphenol-A (BPA) have yet to surface.

“Come August, buyers’ expectations will be heightened that sellers ought to transfer these upstream cost savings to even deeper discounts on epoxy,” the same trader said.

Furthermore, it did not help that buying interest is soft to begin with, as substantive requirements remained weighed down by protractedly lacklustre downstream production momentum.

Although official data, such as China registering an impressive 11.5% year-on-year increase in its June industrial profits, seems to suggest that post-coronavirus economic recovery is well on track - at least within China - market players said that in reality, the picture may still be skewed for the epoxy industry.

For one, epoxy demand within China is supported only by one sector - wind energy - with off-take from other traditional downstream applications like coatings and construction materials still “far from robust”, a producer said.

In the same vein, demand conditions are tepid in other regional outlets, like southeast Asia, which unlike China, do not have any viable wind energy sector to tap on.

And with concerns like second-wave infection risks still looming large in the background, most end-users are inherently pessimistic about the prospects of any near-term turnaround in the demand conditions in markets for their own finished products.

As such, most are likely to keep to a cautious procurement approach for raw materials like epoxy resins for some time out, market players said.

“China’s wind sector is unable to single-handedly support and absorb all of the region’s epoxy output,” the epoxy resins producer said.

If sales to other regional outlets still fail to pick up pace, the producer said: “I have few options but to review operating rates so as to trim excess stocks and alleviate inventory pressures.”

Epoxy resins are used as adhesives on metals and construction materials, as well as in coatings and automobiles. It is also an ingredient for the manufacturing of wind turbine blades.

Focus article by Ai Teng Lim

Photo: Epoxy resins are also used in decorative art pieces. (By Tahir Ikram)

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