Frankfurt (ChemAnalyst)-The war on the European eastern fringes continues to impact domestic supply chains as traders and producers of Epoxy resin gasp for a steady supply of raw materials. Natural gas once again becomes the key driving force for producers to fix their production targets as supplies of LNG form the US and the middle East fail to provide any significant respite. Upstream propylene too is in short supply due to tightness in the naphtha market and a failed arbitrage gamble for the transatlantic propane trade. Exorbitant freight costs and lack of ship space are the immediate causes for the latter.

Traders and refiners on the upstream (naphtha and Propylene) seem to have resisted from securing inventories leading to a shift in the prices equilibrium with naphtha continuing to be available at cheaper rates over the last couple of weeks. Downstream propylene market and in turn the epichlorohydrin (ECH) market had seen signs of softening starting April 21st 22. Olin’s production halt in the month of March citing weak demand in the European Epoxy market did not impact supply significantly as imports from Asia were being preferred as they were priced much more competitively compared to their European counterparts.

April shipments from Thailand and South Korea were priced slightly higher as production halts due to planned turnarounds in the Southeast Asian and Northeast Asian regions combined with freight congestion at crucial container terminals had a bearing on the spot prices assessed on a CFR ARA basis. Shipments of General-Purpose Liquid Epoxy Resin from the East Asian region were assessed in the price range of USD 5350 to USD 5600 with shipments from South Korea being priced on the higher side. While domestic producers including Hexion and Olin have been pricing their product higher through March and April, the spot market was slow to reflect the cost push as the cheaper alternatives from Asia have rendered distributors in the Northwest European region unable to pass on the extra cost to the end user.

Production is expected to improve by the mid-May period as prices of natural gas are expected to further stabilize on account of steady supplies from the US and Qatar. The Dutch TTF had been consistently mellowing down from the highs reached during the last week of February, first week of March period. The lockdowns in the East Asian region could offset demand from the LNG dominant region, thus making available larger volumes for Europe. Upstream propylene and ECH could see higher production levels as supply of crude oil eases further owing to OPEC plus revising their production targets since April which is likely to spill over to the downstream propylene and ECH segments.