USES

Epoxy resins have high chemical and electrical resistance and outstanding adhesion, as well as durability at high and low temperatures, and they can also be poured or cast without forming bubbles. These attributes make epoxy resins useful in encapsulating electrical and electronic components.

Epoxy resin adhesives can be used on metals, construction materials and most other synthetic resins.

They are also strong enough to be used in place of rivets and welds in certain industrial applications. Other applications include coatings, construction, automotive and civil engineering.

Wind blade production has also increased in recent years, with production centred in the US and material exported to China, South America and Europe.

SUPPLY/DEMAND

Global supply of epoxy remains structurally long, mostly driven by increased capacity in Asia since 2010. US supply has remained mostly steady, but a growing share of product sold in the US has come from Asian producers, particularly Chinese, Taiwanese, South Korean and Indian.

Sources said import volumes peaked in the 2015-16 period, but have slowed slightly in 2017 following margin suppression in Asia and rising feedstock costs. As a result, US epoxy producers have been able to raise production rates in 2017.

Demand levels in the US have been growing slowly, around 1-3% above GDP levels, for the past several years.

Wind blade applications have been a large source of growth, with product mostly exported, given US preference for more conventional energy sources. Demand from automotive coatings has been described as another strong sector, with marine coatings and architectural coatings also experiencing steady but slow growth.

PRICES

US domestic epoxy resin contract prices have been assessed up a net of 10 cents/lb ($220/tonne) since the end of 2016. This puts domestic March contracts for standard liquid epoxy resin (LER) at $1.20-1.25/lb on a DEL bulk (delivered in bulk) basis.

One US producer has nominated several price increases totaling a net of 17 cents/lb since the start of 2017, while another producer has nominated a net increase of 22 cents/lb.

Sources said producers are looking to push through the rest of the nominated increases, largely in an effort to restore margins after losses in large portions of 2016.

Spot epoxy resin pricing has started to move up to an average price of around $1.00/lb DEL bulk, having gained 10 cents/lb since the start of the year.

Market players have said Asian sellers are also suffering from margin erosion and might need to restore margins on product into the US through the first half of 2017.

Other market players said they expect lowering feedstock costs in Asia to push Asian epoxy sellers to lower pricing in an effort to reclaim and increase some lost market share from the first quarter in 2017.

Looking upstream, US spot benzene prices recovered early in the week ending 31 March after falling sharply the previous week amid low demand from the downstream styrene sector due to three ongoing outages.

Despite the recovery, benzene spot prices remain well below March contract prices, leading to expectations that April contract prices will settle at a decline later this week. US March propylene contracts have settled at an increase of 4 cents/lb on snug supply and low inventories.

However, spot prices are trending down on expectations of improving supply and lower demand as derivative plant shut down for turnarounds.

TECHNOLOGY

Epoxy is a copolymer formed from a resin and a hardening chemical. Most common epoxy resins are produced from a reaction between epichlorohydrin (ECH) and bisphenol A (BPA), though the latter may be replaced by similar chemicals.

The hardener consists of polyamine monomers, such as triethylenetetramine. When mixed together, the amine groups react with the epoxide groups to form a covalent bond. The resulting polymer is heavily crosslinked, and is thus rigid and strong.

Curing through polymerization can be controlled through temperature and the choice of resin and hardener compounds. The process can take minutes to hours. Some formulations benefit from heating during the cure period, whereas others simply require time and ambient temperatures.

OUTLOOK

The floor of the US epoxy resin market is expected to remain largely driven by high volumes of imported product from Asia, forcing US sellers to keep their premiums against Asian product around 10-12 cents/lb.

There has been some discussion that Asian producers are suffering from very thin margins and could be forced to raise prices more often in 2017, especially as maintenance cycles start up for several newer units.

US producers are expected to push for margin restoration throughout 2017, with demand still likely to grow slowly relative to GDP. No capacity rationalisation is expected in the US, but cutbacks could come from the Asian region.