Introduction: Since September, China’s domestic epichlorohydrin (ECH) market has stopped falling and rebounded, with prices gradually strengthening. As of September 9, the delivered price on an acceptance-bill basis in the Jiangsu market was around RMB 11,550/t, up RMB 400/t, or 3.59%, from the end of August. This round of price increases is the result of both stronger cost support and improved supply-demand fundamentals. In the near term, cost pressure on the feedstock side is rising, the overall supply side shows no obvious pressure, and downstream pre-National Day stocking demand is gradually being released. With multiple bullish factors converging, the ECH market is expected to remain firm in the near term.
Since the start of September, domestic ECH prices have moved steadily upward, with a tight supply-demand structure and stronger cost support together serving as the main drivers. On the supply side, some units in Shandong have shut down or reduced operating rates; combined with most producers focusing on delivering previous orders, spot supply in the market has tightened, further strengthening bullish sentiment among producers and traders. While supply tightened, this also provided spillover support to the main feedstock, glycerine, whose price also moved upward, thereby pushing up production costs for the glycerine-based process and providing rigid support for ECH. On the demand side, due to the unplanned shutdown of Shandong units, delivery of some traders’ contracted volumes was disrupted, and market inquiry activity increased. At the same time, downstream enterprises mainly replenished on dips, their willingness to enter the market and purchase strengthened, and overall market trading activity picked up. Under the combined influence of tight supply, rising costs, and recovering demand, ECH negotiation levels continued to shift upward, and low-priced cargoes gradually diminished. As of September 9, the delivered price on an acceptance-bill basis in the Jiangsu market was around RMB 11,550/t.
Although ECH prices are currently rising steadily, expectations for the remainder of September remain cautious. Core risks include: first, previously shut-down or rate-reduced units are expected to gradually restart and increase output, which may ease the tight spot supply situation; second, downstream willingness to chase high-priced feedstock is limited, purchasing pace is becoming more cautious, and follow-through on high-priced transactions is insufficient. Changes in market supply and demand warrant close attention.
I. Unit Restarts and Rate Increases Jointly Drive Expected Supply Growth
China’s ECH market supply is expected to increase in the near term, as multiple unit restarts and rate increases combine to lift operating rates. Befar Group has resumed operations and raised its load; Shandong Minji and Hubei Minteng also plan to restart; in addition, a few individual units in Shandong have simultaneously increased operating loads, while the remaining units have not yet made obvious adjustments. According to Chempricehub data, this week the average capacity utilization rate of China’s ECH industry was 46.2%, up 0.31 percentage points from last week; output was about 27,000 tonnes, up 0.75% from the previous week. Looking ahead, as margins for the glycerine-based process recover further, related units are expected to raise loads, and the supply increment still needs to be further tracked.
II. Downstream Rigid Demand Remains, but Buying at High Levels Lacks Momentum
Driven by the traditional “Golden September and Silver October” peak season, overall supply from the main downstream sector, epoxy resin, is expected to grow, and the industry’s capacity utilization rate is expected to rise to around 47%, providing demand support for the feedstock ECH market. In terms of purchasing pace, although some downstream enterprises and traders carried out phased, concentrated, small-volume restocking from late August to early September, there is still a gap in overall demand, and buyers still have subsequent purchasing plans. Meanwhile, with the Mid-Autumn Festival and National Day holidays approaching, expectations for downstream restocking have strengthened, and the demand side continues to support the ECH market. This is also a key reason why ECH producers are currently reluctant to sell low and why price-floor support is relatively solid. Considering that prices of the two major raw materials for epoxy resin have simultaneously rebounded to high levels, cost pressure has further intensified, which may provoke downstream resistance and thereby weaken the momentum for demand growth.
III. Cost Support Persists, but the Market Is Gradually Becoming Supply-Demand Driven
Glycerine prices in China are expected to rise slightly in the near term, but the increase will be relatively limited, with cost support and demand constraints coexisting. On the cost side, crude glycerine prices remain firm, providing sustained support to glycerine costs. On the supply side, domestic units are mostly operating normally, imported cargoes are arriving as usual, and overall supply is stable, with no obvious tightening. Demand is the key factor limiting the price increase. Although prices of the main downstream product, ECH, have risen and margins for the glycerine-based process have recovered to some extent, they remain near the cost line; unit operating rates have not improved notably, and purchases of feedstock glycerine are still mainly need-based, with limited demand follow-through, which to a certain extent constrains the upside for glycerine prices. Overall, the glycerine market may show a slight upward testing trend in the short term, but lacks sufficient momentum for sustained gains. Going forward, close attention should still be paid to changes in the pace of glycerine arrivals at ports and the operation of downstream ECH units.
Overall, the ECH market currently has multiple firm supports: supply is expected to increase somewhat, but the increment will be limited; downstream demand, driven by the two holidays, is gradually releasing pre-holiday stocking demand; and cost support is expected to strengthen. Under the combined effect of these factors, the short-term ECH price level is likely to remain firm. In the medium to long term, market movements will still require attention to changes in the supply-demand landscape, and the September average price is expected to extend its upward trend.
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