OUTLOOK ’19: Europe epoxy resins likely to comply with seasonal trends again in 2019

LONDON (ICIS)–The epoxy resins market is heading into 2019 on a very different footing when compared to the previous year.

The market then followed a more traditional end-of-year slowdown which led to initial negotiations in January indicating stable to soft prices.

Where in December 2017 there was an eleventh-hour surge in demand from buyers in China, absorbing global supply, in December 2018 demand remained muted.

There has been talk of greater availability of Asian imports in Europe, and this is likely to continue for as long as demand in China remains weak.

Europe is expected to remain reactive to what is happening in Asia, rather than a proactive player setting the pace for global trading.

Although sentiment indicates a tepid start to 2019, a flurry of activity in China around the Lunar New Year could tighten an otherwise long market.

The opinion of downstream industries appears to be mixed, as while the marine coatings and wind energy sectors are expected to remain balanced, there is less certainty surrounding the automotive and construction sectors.

Demand for epoxy applications in the construction industry has been characterised as weaker in eastern and central Europe, while stable at best in western Europe.

The automotive industry could regain strength in 2019, and the development of using water-based epoxies in the construction of vehicles as well as the painting of them could bring a boost to the market.

Coatings using epoxy resins for food packaging may remain on a downward trajectory as public opinion remains cautious that upstream bisphenol A (BPA) could be carcinogenic.

The biggest impact raw materials are anticipated to have on the epoxy resins market is on production costs.

While BPA prices could eventually increase on the back of tight phenol supply or an uptick in polycarbonate (PC) consumption, prices could also spike for feedstock epichlorohydrin (ECH).

As ECH prices tend to reflect propylene movements, levels could increase if crackers do not re-open as planned in the spring as per currently projected schedules.

While producers will look to recover expenses from buyers, if imports remain at a consistent level there will be little incentive to accept these conditions, and non-integrated suppliers will be the worst affected.

This could cause epoxy resins prices to rise most significantly in the second quarter, with stable-to-soft activity lasting for the duration of the year, although many agree that it is far too early to state this with confidence.

Pricing looks set to follow a more traditional pattern, in contrast to tracking Asian levels on a reactionary basis as happened in 2018, although a squeeze in supply could reinforce this buying behaviour.

In broad terms, less volatility is expected to impact the market in 2019, particularly at the beginning of the year.

However, a backdrop of swiftly changing geopolitical tensions, as well as a glance back at the past twelve months, have left many sources in the market reticent to make assertions about what 2019 could bring.

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Focus article by Morgan Condon