Supply and demand are jointly pressuring epichlorohydrin, keeping it moving within a downward channel.

Lead: From late July to early August, driven by tight spot supply and rising sentiment among traders to restock in stages, the epichlorohydrin market moved upward, with ex-works prices on an acceptance basis once touching a high of 11,700 yuan/ton. However, as downstream users' resistance to high-priced feedstock gradually intensified, the market's ability to take new orders declined. Combined with some units raising operating rates, the increase in market supply put pressure on prices. Since August 6, market trading sentiment has notably cooled, and the price trend has turned from strong to weak. On August 12, transaction prices in the Shandong market first fell below the 11,000 yuan/ton mark, and the market as a whole entered a downward adjustment channel, with the weak pattern not yet reversed in the short term.

During the period, the domestic epichlorohydrin market showed a downward trend. The weekly average price in the Jiangsu market was 11,445 yuan/ton, down 2.93% from the previous week. This round of decline began to accelerate from August 6, mainly due to dual pressure from both supply and demand fundamentals. On the supply side, although some units in Shandong experienced alternating start-ups, shutdowns, and operating rate increases, after offsetting, the overall industry operating rate increased from the previous period, and the volume of effective circulating resources in the market rose. On the demand side, constrained by the “buy on rising, not on falling” mentality, new orders were handled cautiously, and market trading remained subdued. At the same time, the continued decline in epichlorohydrin prices exerted reverse pressure on the feedstock glycerin market, with high-priced glycerin easing slightly, and the theoretical profit margin for the glycerin-based epichlorohydrin process narrowing accordingly. The following analysis focuses on changes in supply and demand.

I. Parallel unit shutdowns and rate increases lead to a notable rise in epichlorohydrin supply

During this period, the supply side of the domestic epichlorohydrin market showed a clear increase. The overall industry operating rate rose from the previous period, with the weekly average capacity utilization rate recorded at 48.86%, up 3.34 percentage points from the prior period. The rebound in operating rates was mainly due to adjustments in unit operations in the main production area of Shandong—restarts of some previously shut units and increased operating rates at existing units ran in parallel, and after offsetting, the output increase was relatively pronounced. In terms of output, during the week from August 7 to 13, total domestic epichlorohydrin output reached 28,500 tons, an increase of 5.95% from the previous week. With output expanding, the previous tight spot supply situation was alleviated in stages, available resources in the market increased, and competitive pressure among suppliers rose accordingly, exerting a bearish effect on market prices.

II. Key downstream epoxy resin shipments under pressure; capacity utilization declines

Table: Comparison of capacity utilization rates of major downstream epoxy resins

During the period, the overall capacity utilization rate of the domestic epoxy resin industry fell slightly, with the weekly average operating rate recorded at 46.53%, down 0.49 percentage points from the previous period. Among them, the operating rates of liquid epoxy resin and solid epoxy resin were 49.16% and 32.67%, respectively, showing differentiated performance. The reduction on the supply side was mainly due to concentrated unit changes: Zhejiang Haobang added a short-term shutdown during the period, Shandong Tianmai entered maintenance, while Dongfang Feiyuan and Hebei Linyuan continued previous maintenance. The combination of multiple shutdowns and maintenance led to unit losses higher than the restart increments. Affected by this, domestic epoxy resin output fell to 38,400 tons in this period, down 1.03% from the previous period, and spot supply in the market tightened slightly.

III. Cost versus supply-demand game; profits of both epichlorohydrin processes narrow further

During this period, the average costs of different processes both declined, but the decline in epichlorohydrin prices was greater than the cost decline, causing theoretical profits for different processes to narrow further. As of August 13, the weekly average cost of the propylene-based epichlorohydrin process was 8,385 yuan/ton, with a weekly average profit of 2,805 yuan/ton, down 528 yuan/ton from the previous period, a decrease of 15.84% period-on-period. The average profit for the glycerin-based epichlorohydrin process fell to -645 yuan/ton, down 285 yuan/ton from the previous period, a decline of 79.17%.

IV. Epichlorohydrin market to remain weak in the next period; downside space may be limited

In the next period, changes in epichlorohydrin unit start-ups and shutdowns will be limited, and the industry capacity utilization rate is expected to change little, with overall supply only maintaining a slight growth trend. However, due to weak downstream demand support, spot supply circulation pressure remains, manufacturers face shipment pressure, and the market competition pattern will be difficult to improve substantively, exerting continuous bearish pressure on market prices. It is expected that the epichlorohydrin market will remain weak, with prices possibly falling. Nevertheless, considering that current prices have dropped to a relatively low level, further downside space may be relatively limited. In the future, attention should be paid to unit dynamics, downstream procurement pace, and market trading developments.