NE Asia EDC hits 11-month high on China demand, tight supply

SINGAPORE (ICIS)–Ethylene dichloride (EDC) spot prices in northeast Asia hit their highest in more than 11 months, and continued to firm with increased spot deals from non-vinyl buyers in the key China market amid tight supply.

“We might see more spot activity from the spot solvent/distributors. Overall, the market should be more active compared to last year,” said a Chinese trader.

In the week ended 20 April, EDC spot prices in northeast Asia were assessed at an average of $290/tonne CFR (cost & freight) NE (northeast) Asia, up $15/tonne from the previous week.

The prices are at their highest since 2 June 2017, and were up 73% from the start of 2018, according to ICIS data.

China’s lifting of import restrictions on EDC this year caused a spike in spot demand from smaller players in the solvents industry.

Importers were previously being required to register with the Chinese environment ministry for overseas procurement of EDC, which was classified among 162 toxic chemicals subject to restrictions from 2014-2017.

EDC mainly goes to the production of vinyl chloride monomer (VCM), but is also used in solvent production for the textile, metal cleaning and adhesives industries.

Buyers from the solvent sector appeared more willing to buy imported EDC at higher prices.

Last week, a deal for a 5,000-tonne cargo for May delivery was concluded at $310/tonne CFR China between a Japanese trader and a Chinese non-vinyl producer.

An unconfirmed deal was said to have taken place at $350/tonne CFR China to another buyer in the solvents industry.

Whereas from vinyl producers in northeast Asia, buying indications for EDC last week were comparatively lower at $270-300/tonne CFR NE Asia as they were under no pressure to buy spot cargoes.

Some market players cautioned that the bullish sentiment may not last.

“While non-vinyl [buyers] are able to pay firmer prices, they have limited demand,” a South Korean producer said.

Roughly 95% of EDC is used in the manufacture of VCM, nearly all of which goes into polyvinyl chloride (PVC), according to ICIS data. Most EDC plants are integrated with VCM production.

Spot regional supply is tight because of upcoming turnaround season in Japan in May-June, and with US supply, which normally gets sold to China, being diverted to Brazil, following an outage at Braskem’s chlor-alkali plant.

Brazilian producer Braskem has been buying large volumes of caustic soda and EDC out of the US Gulf.

Meanwhile, threats of a trade war between the US and China is also worrying market players. China’s plan to impose a 25% import tariff on EDC, as well as on downstream product polyvinyl chloride (PVC), from the US, could lead to a further tightening of supply and further spikes in regional prices, market sources said.

In February 2018, the US remained China’s biggest source of imported EDC; followed by Indonesia, South Korea and Taiwan.

Last year, China imported 370,844 tonnes of EDC from the US, representing 28% of US’ exports of the material.

Focus article by Jonathan Chou

Additional reporting by Fanny Zhang

Picture: Qingdao port in China’s Shandong province. (Source: Sipa Asia/REX/Shutterstock)