Price and market trends: Asia epoxy resins prices ease off 15-month highs

17 July 2014 18:14 Source:ICIS Chemical Business

Negotiations are still underway between Asian sellers and buyers in the US, Europe, South America and the Middle East

Spot liquid epoxy resins (LER) prices in Asia eased off 15-month highs on buyer resistance, after a strong run-up in recent weeks that was driven by rising costs of feedstock bisphenol-A (BPA) and gains in the upstream benzene market, industry sources said on 11 July.

But cost-push pressures will keep prices firm in the near term, they said.

On 8 July, LER was assessed at an average of $2,630/tonne FOB (free on board) NE (northeast) Asia, down by $10/tonne from the previous week, when prices hit their highest since April 2013, according to ICIS data.

Until mid-June, LER prices have been stable at an average of $2,575/tonne FOB NE Asia since late-March despite rising cost of feedstock epichlorohydrin (ECH). Buyers resisted any form of price hikes initiated by sellers in a well-supplied market amid relatively steady demand then. ECH prices in South Korea and Japan increased by $150-200/tonne in March and May, respectively.

But regional producers were hard pressed to raise their prices this time, hoping to pass on their mounting feedstock cost pressure to end-users, market sources said.

Producing a tonne of LER requires 700kg of BPA and 600kg of ECH.

“We have no choice but to raise our [July LER] offers as we did not increase our prices, when ECH prices increased in [South] Korea in March,” a South Korean producer said.

Negotiations are still underway between Asian sellers and buyers in the US, Europe, South America and the Middle East following the announcement of a $50-100/tonne price hike by producers in early July.

“While some [of my] southeast Asian customers have accepted an increase of $50-60/tonne, customers from other regions, especially the US and Europe, are resistant as the [domestic] prices over there are unchanged,” a Taiwanese producer said.

“It is inevitable that we [will] lose some volumes in the US and Europe at the higher prices, but we can’t keep absorbing the cost increase if feedstock prices keep rising,” the producer said.

Epoxy resins producers are not ruling out reducing their prices to June levels to move cargoes, but this will depend on how prices of feedstock BPA will behave in the coming weeks, market sources said.

BPA prices were assessed stable at an average of $1,730/tonne CFR China on 4 July, after rising a cumulative $105/tonne or 6.5% over five consecutive weeks because of short supply, according to ICIS data. Benzene prices stood at $1,360-1,385/tonne FOB Korea on 11 July.

Market players expect BPA prices to undergo a minor correction in the coming weeks as supply will ease with the resumption of operations at a few northeast Asian facilities that underwent turnarounds.

By Matthew Chong