Asia EDC hits 4-year high on supply, China tariffs

Asia’s ethylene dichloride (EDC) prices are at their highest in four years, and may remain supported into the first quarter of 2019 on continued tightness in spot supply.

EDC average spot prices rose to $395/tonne CFR (cost & freight) NE (northeast) Asia in the week ended 7 December from $167.50/tonne CFR NE Asia in the week ended 5 January 2018, ICIS data showed. The same can be seen in southeast Asia, where average prices rose to $395/tonne CFR from $175/tonne CFR over the same period.

The last time prices were higher was on 24 October 2014 for northeast Asia, and on 14 November 2014 for southeast Asia. The uptrend is due to scant spot availability amid lowered trade volumes from the US, a major exporter of EDC to Asia. US overall export volumes for EDC in the first three quarters of 2018 fell by 22.3% year on year, according to the US International Trade Commission (ITC). To Asia, US export volumes this year declined compared with 2017, with shipments to Japan down 69.3%, the data showed.

US producers are likely to have kept their EDC volumes for captive use into the production of polyvinyl chloride (PVC).

Spot EDC prices rose from the start of the year on tight spot supply amid changing trade flows, which were aggravated in April on an outage at Braskem’s chlor-alkali plant in Brazil. Asian supply tightened further during the month as US cargoes were diverted to Brazil.

CHINA 25% TARIFF ON US EDC

Market sentiment was further rattled when China, a key importer in the region, imposed a 25% tariff on US EDC on 23 August. With less spot supply heading into China this year, some integrated chlor-alkali producers in the country have been selling excess EDC to the domestic market amid lukewarm spot demand for downstream vinyl chloride monomer, according to market sources.

Some integrated chor-alkali producers may also be reluctant to lower EDC prices amid squeezed margins in chlorine’s co-product, caustic soda. Caustic soda prices hit a 28-month low in northeast Asia and will likely remain under pressure as producers face mounting inventory, while shipments to the key India market are still hampered by certification requirements. Middle East plant turnarounds in March 2019 may also reduce spot volumes to Asia, market sources said. However, a major northeast Asian chlor-alkali producer is resuming full production at the beginning of 2019.

The company’s chlor-alkali production rate has been around 90% since mid-2018 on technical issues, leading to less chlorine for EDC, sources said. More chlorine may therefore be available, but overall demand is expected to outstrip supply as restocking is expected to continue in Asia.