China ECH edges up on uptick in buying interest

SINGAPORE (ICIS)–Discussions for China’s domestic epichlorohydrin (ECH) are firmer this week as buying appetite starts to pick up.

This week, domestic supplies were sold at an average of yuan (CNY) 11,500/tonne DEL (delivered) east China, market sources said, with some ECH makers angling to price higher than this.

The mood is more upbeat than last month, which saw domestic ECH prices crashing dramatically from a 2019-peak of over CNY 18,000/tonne in October to barely CNY11,000/tonne DEL east China by 10 December, ICIS data showed.

“Customers are more enthusiastic now,” a domestic ECH maker said, adding that he has received a lot more enquiries for cargoes, and potential buyers are also seemingly more receptive of his higher asking prices.

Market players said that several developments bolstered sentiment, one of which was the positive turn in the US-China trade conflicts, culminating in the latest bilateral agreement for a phase 1 trade deal.

Also, more China-based users now want to book ECH cargoes soon to ensure delivery before related logistical and transportation services start to wind down in a couple of weeks, ahead of the extended Lunar New Year holidays due to start from around 23 January 2020.

But whether the upside potential in domestic ECH prices could sustain is unclear, market players said, as it would also hinge on how pricing conditions in downstream markets pan out.

ECH is used mainly to produce epoxy resins and has wide applications in downstream industries like automobiles.

Prices for epoxy resins, in both yuan and US dollar terms, have been quite steady in the last few weeks, market sources said, adding that these help keep ongoing ECH talks supported to some extent.

But persistently grim outlook in the auto sector may continue to cast a pall on epoxy resins trade moving forward.

Latest data showed that China’s vehicles sales continued to decline in November, 17 months in a row.

If this trend stays un-arrested, market sources said that it would do little to lift epoxy resins demand fundamentally, which may mean epoxy resins makers’ ability to pay more for ECH feedstock will remain capped.

Focus article by Ai Teng Lim

($1 = CNY7.0)

Photo: Containers loaded into a container ship at the Port of Qingdao in China. (By Wu Hong/EPA-EFE/Shutterstock)

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