Price and market trends: China ECH prices at 2.5-year high

29 August 2014 09:56 Source:ICIS Chemical Business

Domestic spot epichlorohydrin (ECH) prices in China may remain strong at 2.5-year highs following an unprecedented 31% surge in a span of a month, on the back of tight supply, market sources said on 22 August.

On 19 August, ECH was assessed at yuan (CNY) 13,000/tonne ($2,114/tonne) DEL (delivered) east China on 19 August, a level not seen since March 2012, according to ICIS data.

Lower production since late July has been causing domestic prices of ECH to spike, sources said.

“I am surprised [China domestic ECH] prices could go up by so much in such a short period… This is not normal,” said a major China-based epoxy resins producer.

The epoxy resins producer warned that prices may come crashing down as quickly as they had gone up as they did in the past.

In previous occasions of strong price gains – on 26 November-31 December 2013 and on 6 May-3 June this year – there had been a tendency for prices to fall back to CNY9,500-10,000/tonne levels.

But most market participants expect ECH prices to hold up and find support at CNY12,000/tonne DEL east China in the coming weeks as the tight supply is unlikely to ease any time soon.

“How long the firm [domestic ECH] prices can hold up depends a lot on when Haili’s Jiangsu plant is able to resume operations,” a Taiwanese ECH producer commented.

Shandong Haili, the biggest ECH producer in China, has yet to restart its 130,000 tonne/year plant atYancheng in Jiangsu province that was shut on 25 July because of technical problems at an upstream caustic soda unit at the site. It remains unclear when the unit can resume production.

To make up for the lost production from the shutdown, the company restarted its idled 80,000 tonne/year ECH line at Zibo in end-July, but this smaller unit may be running at just up to half its capacity, market sources said.

The line was not able to run smoothly after having been idle for a long time, they said, but this could not be confirmed with Shandong Haili.

The company is now running three of its four 80,000 tonne/year ECH lines in Shandong.

Before end-July, Shandong Haili accounted for roughly 60% of China’s total ECH production, with its 130,000 tonne/year plant in Jiangsu and two operating 80,000 tonne/year lines in Shandong, industry sources said.

Meanwhile, Jiangsu Yangnong – another major domestic ECH producer – has cut operating rates at its 90,000 tonne/year plant in Yangzhou to 50% or lower from 60% previously. Production was reduced in deference to the Chinese authority’s pollution restrictions imposed on plants in areas surrounding Nanjing, where the Youth Olympic Games (YOG) were being held from 16-28 August.

Some market players said that high ECH prices are unlikely to be sustained in the long run amid weaker demand from downstream epoxy resins sector in China.

Local producers of liquid epoxy resins (LER) are currently running their plants at an average rate of around 50%, down from 70-80% in June, taking into account the surge in prices of feedstock bisphenol A (BPA), according to market sources.

BPA prices have soared 21% over three months to $1,965/tonne CFR China on 15 August, according to ICIS data.

By Matthew Chong