European Epoxy Resin Market likely to face tight supply by the end of second quarter

European producers and suppliers of epoxy resin continue to struggle with the persisting supply tightness in the raw materials market. Although energy prices stabilized in the month of April with Dutch TTF showing very narrow spot fluctuations, the continuing logistical constraints like lack of ship space and rail cars continue to be major bottlenecks since the beginning of the war between Russia and Ukraine.

Most naphtha crackers in Northwest Europe have seen an easing of crack spreads in April due to lower pressure from naphtha feed prices. Benchmark Naphtha CIF Northwest Europe Price had shown a decline of 3.7% during the week ending 22^nd of April. This resulted in a relaxation in prices of downstream propylene and in turn the prices of Epichlorohydrin which is the critical feedstock in the production of Epoxy resin.

Dow Chemicals, LyondellBasell and other major producers have been hesitant to implement the price push initially planned for the month of April due to the geopolitical and economic uncertainties that have been disrupting the market signals for the last two months. Although USA had promised to maintain a stable supply of LNG for the rest of the financial year, utility costs for European manufacturers continue to be at decadal highs.

The only positive for the Epoxy producers in Europe is the fact that the downstream demand continues to be healthy, albeit the European automotive industry contemplating a slowdown in their production lines for the quarter ending June. Most demand is being driven by the paints and coatings industry which is likely to put up strong quarterly growth numbers ranging in 1% to 1.5% , quarter on quarter growth.

With the war situation nowhere close to a conclusion, and crude oil prices expected to stay in a relatively stable price range of USD 90/b to USD 110/b for the month of March, the Epoxy market could see prices easing even as supply tightness in the raw materials market persists. Manufacturers are expected to revise their offers slightly lower for the month of May, taking into consideration the fact that the raw material supply tightness will ease to a moderate degree in the next few weeks. The supply of resin itself may not see any improvement as producers are hesitant to improve production levels until the cloud of uncertainty in the market is fanned out.