Epichlorohydrin and epoxy resin: the market showed a downward trend in the first half of the year

In the first half of 2022, the market of epoxy resin industry chain showed a downward trend. Among them, the raw material bisphenol A fell significantly, down 30.17%. The epichlorohydrin market, another raw material, fluctuated widely, with an overall decline of 6.29%. However, the downstream epoxy resin market showed weak performance, and the profit margin of the resin contracted significantly, with solid resin down 18.98% and liquid resin down 16.82%.

Since 2022, due to the frequent disturbance of crude oil supply expectations due to geopolitical factors such as the Russian Ukrainian war, crude oil fluctuations have been significantly dominated by supply and demand, and tight supply expectations have driven the center of gravity of crude oil prices to rise. For the chemical market, the cost of crude oil at a high level has a good support. The continuous high level of glycerol has a significant supporting effect on epichlorohydrin, especially glycerol process plants. Coupled with the insufficient starting load of shutdown and maintenance of some devices, the high level of epichlorohydrin in the first quarter fluctuated significantly, and it rebounded once it touched its cost line. The average price of bisphenol A in the first quarter decreased by 3.3% month on month compared with the average price in the fourth quarter of 2021. The price increase of epichlorohydrin significantly strengthened the cost support of epoxy resin. However, the epoxy resin market is restricted by the demand problem, and the market is weak to follow up the high level of epichlorohydrin. The average price of solid epoxy resin in the first quarter increased by 5.73% year-on-year, a decrease of 1278 yuan from the average price in the fourth quarter of 2021, a decrease of 5.12%. In the first quarter, the average price of liquid epoxy resin increased by 0.49% year-on-year. Compared with the average price in the fourth quarter of 2021, it decreased by 3088 yuan, or 10%.

Since mid March, the domestic epidemic has escalated, resulting in obvious phased restrictions on logistics and transportation. The overall orders of the industrial chain have declined, and high costs have led to shrinking profits. The epoxy resin market has been dominated by supply and demand, and new production capacity such as Zhejiang Haobang has been released. The contradiction between supply and demand in the market is prominent. Crude oil and other commodity markets rose strongly. In early June, crude oil futures prices in Europe and the United States both stood at the high point since March 8, returning to the ultra-high oil price area above $120 / barrel. However, due to the impact of the Federal Reserve's interest rate hike and other factors, the domestic economic environment is poor, and the epoxy resin industry chain has also continued to adjust downward in the second quarter. Especially since June, the whole industry chain has been full of bad news. The cost difference between the two processes of epichlorohydrin is relatively large. The profit situation of propylene method is significantly better than that of glycerin method. The shipping pressure is that some factories make concessions to ship, and the market focus continues to decline. In addition, Jiangsu Haixing plant is expected to restart in early July, There is a strong wait-and-see atmosphere in the market. On the other hand, bisphenol A, a raw material, broke its position and went down. The support of double raw materials was weakened, the panic of resin fell sharply, and the contradiction between supply and demand in the field was obvious. The liquid and solid epoxy resin market mostly went down near the cost line and even ran at a loss. Some resin factories reduced their burdens or shut down, and the market atmosphere was light.

At the beginning of July, the bisphenol a market continued to decline to the level of the end of June 2020. The short-term market continued to be weak, and the decline may narrow in the later period. As the price of epichlorohydrin continues to drop, the gap between the two processes continues to widen. In addition, in July, Jiangsu Haixing, Jiangsu Ruiheng and Shandong Binhua restarted, and the market supply is expected to increase. In addition, the demand for raw materials of epoxy resin shrinks significantly in the off-season, and the industrial chain is not good enough in the short term. However, after the new units such as Ruiheng were put into operation, some production capacity was still released, the resin industry chain was in the expansion cycle, the competitive pressure of the industry was not reduced, and the industry profit was significantly narrowed, and the subsequent contradiction between supply and demand was not reduced. Pay attention to the demand and raw material changes in the second half of the year.