Epoxy Resin Market to Inch Up and Then Decline in H2 of 2024 After a Fluctuating H1
Introduction: In H1 of 2024, the epoxy resin market in China moved down after hovering at highs, and then went range-bound. The demand side had no continuous improvement, and prices fluctuated limitedly under the influence of cost and supply. In H2 of 2024, the cost support may remain, and supply is unlikely to increase, but considering the limited growth in demand, the price uptrend may lack continuity. It is predicted that epoxy resin prices may remain at a medium-to-low level, with a trend of first rising and then dropping, with limited variations.
In H1 of 2024, epoxy resin market prices in China headed down after hovering at highs and then went range-bound. The price trend slightly deviated from the forecast in SCI’s 2023-2024 China Epoxy Resin Market Annual Report. Affected by weak demand, epoxy resin prices fluctuated at lows from March to May. From January to June 2024, epoxy resin E-51 prices in East China (for acceptance, delivered, tax included, in barrel, truck transportation, similarly hereinafter) averaged RMB 13,574.39/mt, down 7.91% Y-O-Y. On June 28, China’s E-51 price closed at RMB 13,500/mt, down 2.53% from the beginning of the year.
Taking epoxy resin E-51 in East China as an example, epoxy resin prices trended sideways in January, as the cost support changed slightly, market demand stayed insufficient, and market trading remained lackluster. In February, the cost support was strong first and then weakened, and most downstream enterprises showed sluggish demand amid low operating rates during the Spring Festival holiday. Therefore, epoxy resin prices moved sideways after inching up. The highest average price was 13,950/mt appearing in late February. In March, epoxy resin prices fluctuated downwards due to weakened cost support and unsmooth sales. In April and May, feedstock BPA prices notably rose, giving firmer cost support. This attracted some downstream enterprises to purchase essential volumes, and epoxy resin producers raised prices accordingly, so prices bottomed out and then fluctuated upwards. The lowest price was RMB 13,100/mt in early April. In June, buyers maintained need-to purchases with a cautious sentiment and lacked confidence in the future market. The feedstock cost slightly increased, giving certain bottom support to epoxy resin prices. Besides, some sellers moderately cut profits to sell according to their order status, so negotiation prices of new orders were largely stable.
In H1 of 2024, epoxy resin market prices were range-bound, due to insufficient cost support, increased supply, and weak downstream and end demand.
Feedstock prices marginally fluctuated or fell, weakening the cost support to the epoxy resin market.
In H1 of 2024, the prices of main feedstock BPA and ECH saw rises and drops, giving insufficient cost support to epoxy resin prices.
In H1 of 2024, BPA prices in China fluctuated within the range of RMB 9,000-10,000/mt, with a fluctuating upward trend in June. The highest price of BPA in H1 was RMB 10,200/mt at the end of June, in line with the following factors. First, the high-hovering benzene prices drove the feedstock phenol prices up, and feedstock acetone prices remained high amid tight supply. Due to the high costs, BPA producers were inclined to maintain firm offers. Second, amid ongoing profit losses, some BPA producers reduced operating rates or shut down from April. As of the middle of 2024, BPA social inventory was reduced effectively, and spot availability was tight, bolstering the BPA prices. However, due to the wide increase in output and slow demand growth in Q1, BPA prices notched the lowest level at the end of March, with the negotiation prices dropping to RMB 9,150/mt.
In H1 of 2024, ECH market prices in China moved sideways and then inched down. The highest daily price was RMB 8,400/mt in January. On the one hand, feedstock glycerin prices inched up, giving fairish cost support to glycerin-based ECH. On the other hand, in early January, some plants in Zhejiang and Shandong shut down for maintenance, and other plants delivered long-term contracts and previous orders, leading to low spot inventory and tight spot supply. However, end demand was relatively limited, and downstream enterprises mainly purchased on a need-to basis, giving mediocre demand support. So, prices were range-bound marginally amid both weak demand and supply. From February to June, downstream epoxy resin demand and end demand were sluggish, and ECH prices gradually dropped to a low ebb. Some glycerin-based ECH plants shut down under inventory pressure, and sparse propylene-based ECH plants switched to produce PO. However, the declined supply failed to bolster the market because of weak demand, so ECH prices sustained the downtrend. In H1 of 2024, the lowest price of ECH was RMB 7,125/mt in June, breaking the lowest record since 2019.
In H1 of 2024, the overall cost support slightly softened, and epoxy resin prices went down accordingly. The market average prices of BPA and ECH in East China were RMB 9,680/mt and RMB 7,846.07/mt respectively, down 0.49% and 7.54% Y-O-Y. The average cost of epoxy resin E-51 dropped by 2.35% Y-O-Y to RMB 13,770.55/mt, which dragged down epoxy resin prices in some periods. As of June 28, the average theoretical gross profit of epoxy resin E-51 was RMB -196.16/mt, down 60.19% Y-O-Y.
The overall operating rate was at a medium-to-low level in H1 of 2024.
As for supply, epoxy resin capacity kept growing in H1 of 2024. The 75kt/a unit at Tongling Shanwei New Material Technology and the 100kt/a unit at Henan Sanmu Surface Material Industrial Park were added. Some units scheduled to launch in H1 were delayed due to poor profitability. Overall, there was a total of 175kt/a newly added capacity released in H1, enhancing the market supply. The average operating rate of the epoxy resin E-51 industry was around 52%, down 4 percentage points Y-O-Y. The output of epoxy resin was approximately 842.4kt, up 16.82% Y-O-Y. Besides, the import volume was about 71.5kt from January to June, down 12.27% Y-O-Y, mainly due to sufficient supply in China’s domestic market. In H1, most producers shut down during the Spring Festival holiday, leading to a notable decline in the operating rate. In March, some producers maintained medium operating rates given sloppy sales and high inventory pressure. In April and May, the rise in feedstock prices pushed up the epoxy resin orders, and plants increased operating rates. However, the industry faced higher profit losses, so some plants shut down units or reduced operating rates. In general, the overall operating rate decreased M-O-M in H1 of 2024, but total output increased Y-O-Y due to the expanded capacity base.
Epoxy resin is used in the end-use market such as coatings, electronics, and composite materials, so the end demand change is also a major focus for most players. According to the National Bureau of Statistics, from January to May, the housing construction area of real estate development enterprises was 6,888.96 million square meters, down 11.6% Y-O-Y. The new start of construction area was 300.9 million square meters, down 24.2%. The completed construction area was 222.45 million square meters, down 20.1%. The end-use real estate market performed weakly, and the demand for epoxy resin in building coatings and indoor coatings declined significantly, which weighed on the overall epoxy resin demand. The apparent consumption volume of epoxy resin in H1 of 2024 reached about 772.8kt, up 4.18% Y-O-Y. However, the increase in supply exceeded that of demand, and the demand-side support was limited, so epoxy resin prices fluctuated in H1 of 2024.
In H2 of 2024, the change in supply-demand fundamentals and feedstock costs may still be the main drivers for the epoxy resin market trend.
Oil prices are expected to rise first and then drop, underpinning players’ sentiment.
The change in oil prices influences players’ operation sentiment. In H2 of 2024, macro data, geopolitical issues, and consumption peak season are the main factors affecting oil prices. It is predicted that oil prices may trend firm in Q3 and then fall in Q4. It is advised to pay attention to actual demand in Q3, if peak season performs below expectations, the oil prices have a high possibility to drop. In Q4, amid the potential increase in supply and decline in demand, oil prices may notch the lowest point within the year. Besides, the inventory level of crude oil and refined oil increases significantly, so the peak oil prices may be lower than that in September of 2023. However, the geopolitical risks might cause the oil prices to soar beyond expectations. Overall, the change in oil prices may have guidance on bulk commodities from the cost side. In H2 of 2024, the price change in epoxy resin may be largely consistent with that in oil prices.
ECH and BPA prices may remain range-bound within a narrow range, lending cost support to epoxy resin prices.
As for BPA, it is predicted that BPA market prices will probably rise first and then drop in H2 of 2024. High costs will boost BPA prices and persistently underpin the market bottom prices. However, the growth in supply is expected to outpace that in demand, restricting the price increase space. It is predicted that BPA prices in East China may be in the range of RMB 9,300-10,500/mt. As for ECH, it is predicted that ECH market prices may hover at lows. In specific, prices may slightly fluctuate at lows in July and August, inch up in September and October, and then soften in November and December. The mainstream market prices are likely to hover in the range of RMB 7,180-7,600/mt. According to the seasonal pattern, the highest price in H2 will probably appear in September and October, and the lowest price may appear in December. The overall feedstock cost may fluctuate limitedly, with firm prices in Q3 and weakened prices in Q4, giving certain cost support to epoxy resin prices.
Market supply-demand fundamentals may change limitedly in H2 of 2024.
In H2 of 2024, there may be 330kt/a newly added capacity of epoxy resin. End consumption may hardly improve, and the epoxy resin industry suffers low profitability. Producers with new projects may stay on the sidelines and wait for profits and demand to improve. Therefore, the newly added capacity may have a limited contribution to market supply, and the operating rate may not change much compared with H1. The market will possibly still be oversupplied. As for demand, July and August are traditionally demand slack season, end industries may maintain low operating rates, and demand for epoxy resin demand may stay weak, so prices are likely to hover at lows. September and October mark the traditional demand peak season, end industries may see improved operating rates and show higher demand for epoxy resin, leading to an increased operating rate of the epoxy resin industry. However, demand is likely to cool down at the end of the year. In general, the demand for epoxy resin may have a limited boost to the market in H2 of 2024, and downstream and end players will probably maintain essential purchases with a cautious stance, giving limited support to epoxy resin prices.
There is a high possibility that epoxy resin prices rise in September and October seasonally.
The price fluctuations of epoxy resin have certain seasonal characteristics, with a high possibility of price rising in the traditional peak season and replenishment cycle before holidays, while a high possibility of price decreasing in other periods. In January and February, the downstream replenishment before Spring Festival propped up epoxy resin prices. In September and October when consumption is in the strong season traditionality, prices will probably ramp up. In March-May and November-December, the market will gradually enter the consumption off-season, and downstream enterprises may mainly consume previously purchased feedstock, and show weak buying passion, so market prices are likely to drop. It is predicted that epoxy resin market prices may sustain the seasonal pattern, with prices inching up in Q3 and softening in Q4.
In conclusion, SCI still holds the price trend forecast for H2 of 2024 in the 2023-2024 China Epoxy Resin Market Annual Report. It is predicted that epoxy resin market prices will probably inch up and then soften in H2 of 2024, with limited variation overall. The mainstream prices may range from RMB 13,000-14,000/mt. According to the seasonal pattern, the peak price in H2 may appear in September and October, while the lowest price may appear in December.
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