OUTLOOK ’17:Asia epoxy resins prices set to rise on firmer upstream

By Amy Tan

SINGAPORE (ICIS)–Asia’s liquid epoxy resins (LER) spot prices may have room to increase further in the first quarter following recent gains in feedstock bisphenol A (BPA), market sources said.

On 20 December, northeast Asian producers were raising offers to around $1,720/tonne FOB (free on board) NE (northeast) Asia compared with deal done levels at $1,620/tonne FOB NE Asia in the previous week.

Asian iso-tank LER prices were stable at $1,620-1,800/tonne FOB NE Asia for most of the third quarter of 2016, according to ICIS pricing data.

The low end of the price range reflects offers into southeast Asia while the high end of the price range reflects offers into Japan.

“We cannot continue offering cargoes at $1,620/tonne FOB NE Asia given the recent gains in feedstock BPA. We are not making any money at this price,” said one northeast Asian producer.

While no deals were heard concluded at this price level yet, northeast Asian producers are confident that buyers would eventually accept higher prices, given the possibility of further upside to BPA costs.

“If customers are resistant to the higher prices, it is likely they won’t be able to get cargoes ahead of the Lunar New Year festival,” said a separate northeast Asian producer.

Consequently, buyers were also heard increasing their buying indications to around $1,650/tonne FOB NE Asia on 20 December.

However, the bulk of northeast Asian producers placed minimum workable levels at $1,700-1,720/tonne FOB NE Asia, resulting in a buy-sell gap.

While the outlook of raw material price movements is still unclear, some producers said they were looking at increasing prices further in mid-January.

In 2016, demand for LER was stable in Japan compared with weak demand in southeast Asia, Europe and North America.

According to market sources, this stable demand is expected to extend to 2017.

Offers for northeast Asian cargoes into Japan were heard at $1,900/tonne FOB NE Asia on 20 December.

One domestic LER producer said demand from Japan’s construction and automotive business sectors continue to support demand for LER.

Epoxy resins are used in downstream sectors such as automotive and industrial paints, electrical laminates as well as linings for storage tanks.

Meanwhile, demand from the Middle East is expected to remain tepid due to the availability of competitively-priced domestic cargoes.

“Most of our regular customers in the Middle East have been buying small quantities of cargoes in order to maintain our business relationship. I don’t think anyone there would import cargoes to stockpile since they can get domestic cargoes easily,” said one northeast Asian producer.