Epoxy resin market to fluctuate after initial rise in July

Overall, epoxy resin prices have experienced a moderate decline since 2023, primarily attributable to the slower-than-expected recovery of downstream demand. In a recent development, however, epoxy resin prices have started to rebound since mid-June due to higher and firmer BPA costs. As of July 10, epoxy resin prices climbed to Yuan 12,700/tonnes. Whether the epoxy resin market can sustain this uptrend on rising costs has become the focus of market players. 

China Epoxy Resin Prices

Source: OilChem

In mid-June, quotations of epoxy resins kept going up on stronger cost support as feedstock BPA prices fluctuated upward. Subsequently, with dual support from not only firm feedstock costs but also better downstream rigid demand, epoxy resin prices rose again in late June. Entering July, epoxy resin prices continued the uptrend due to firm BPA prices and were close to the Yuan 10,000/t mark, even though transactions gloomed following the end of periodic downstream procurement. Under heavier cost pressure, producers raised their quotations. As of July 10, liquid epoxy resins were trading at Yuan 12,500-12,800/t (without packaging), up Yuan 700/t or 5.83% month on month.

Given the current cost support, producers are inclined to raise prices, but this is challenged by the lack of improvements in downstream demand. Whether epoxy resin prices can go up steadily on higher costs hinges on the following three factors: 

1. Epoxy resin costs stay high on strong BPA prices

At present, BPA prices are firm becasue of low availability of spot supplies on the market because producers are reducing their sales in order to first meet their own demand and long-term clients and traders are facing tighter supplies. Transaction prices of BPA will remain high on the market as suppliers who anticipate higher pricing are reluctant to sell their goods, despite active inquiries from downstream users. Prices of epichlorohydrin, another raw material used to produce epoxy resins, were quite low and are not likely to drop further. Overall, epoxy resins will continue to draw support from the cost side.

2. Market players remain cautious about supply growth

Compared to a low 30% operating rate among solid liquid epoxy resin producers, liquid epoxy resin producers have maintained an operating rate of around 50%, without definite scheduled unit maintenance in July. Facing increasingly higher BPA costs, some epoxy resin producers have postponed the restart of their units now under maintenance. New units won't likely be introduced this month, the exact date is still to be determined. Epoxy resin output is expected to be 130,000 tonnes in July, with an operating rate of about 50% among all producers.

3. Demand is hard to improve in the off-peak season

During the off-peak season, demand for epoxy resins is weakening due to limited rigid demand from users in sectors such as electric and electronic, coatings and composite materials. Furthermore, while periodic replenishments may occur in late July, they are expected to be temporary rather than sustainable. Consequently, there won't be substantial improvements in downstream demand.

On balance, epoxy resin prices are projected to turn volatile after rising on firm feedstock costs and producers' willingness to raise prices in mid- and late July amid bearish expectations regarding demand and supply.

Written by Todd Zhu, todd@oilchem.net

Edited by Navy Liu, liuchuanjun@mysteel.net