The Brazilian Epichlorohydrin market experienced a sudden decline in early August 2024, a development that stands in contrast to the generally optimistic outlook for the broader downstream construction sector. While the industry has demonstrated remarkable resilience in navigating global challenges, adapting to evolving demand patterns, and benefiting from increased construction spending, these positive trends have failed to materialize a commensurate surge in Epichlorohydrin demand and consecutively declined the price trend for Epichlorohydrin during this timeframe.

Despite a broader uptick in construction activity, characterized by rising construction spending and an increase in building permits, the sector has exhibited uneven performance across different regions and segments. Furthermore, underlying business and consumer confidence remains subdued, tempering overall demand for construction-related materials, including Epichlorohydrin. Simultaneously, the Epichlorohydrin production process is heavily reliant on a range of inputs, including energy, freight, and raw materials. A substantial increase in the cost of these inputs has significantly eroded profit margins, dampening market sentiment. This cost pressure was exacerbated by a recent decline in freight charges, which facilitated a surge in competitively priced Epichlorohydrin imports from China. The influx of these lower-cost imports intensified price competition within the Brazilian market, further contributing to the downward pressure on Epichlorohydrin prices to settle at USD 2673/MT, ECH CFR Santos, Brazil on 9th August 2024.

The dynamics of the global Epichlorohydrin supply chain also played a role in the price decline. While there was a minor increase in the volume of concrete shipments from Asia to Brazil, this was followed by a drawdown of market stockpiles as producers accelerated shipments. Additionally, a decline in ocean freight rates from Asia, primarily driven by easing congestion at major Asian ports and the introduction of new vessel capacity, reduced shipping costs and further dampened Epichlorohydrin prices. The earlier-than-expected peak season in South America and Europe also contributed to softening demand and subsequent rate decreases. Moreover, As rains enable authorities to loosen drought-imposed limitations, the Panama Canal anticipates increasing the number of daily passage slots for vessels to 36 from the current 34 starting in September, according to the deputy administrator of the canal. From August 4, daily vessel transits will rise to 35. Daily transit totals under typical operational conditions range from 36 to 38.

As per ChemAnalyst, the Epichlorohydrin prices in Brazil are expected to rebound in the second half of August 2024 on the back of an expected incline in freight charges caused by the Israel-Hezbollah anticipated war. Moreover, the cost of production could rise if the price of the feedstock, propylene, rises in the meantime.