Impact of Cost and Supply-Demand Dynamics: Epichlorohydrin Prices Stabilize Before Declining

Introduction: In November, the domestic epoxy chloropropane (ECH) market exhibited a trend of rising then falling. Prices of key raw materials—propylene and glycerin—declined, weakening cost support across different process routes. However, profit margins remained limited, resulting in low production enthusiasm among enterprises. Spot supply pressure was minimal, and downstream restocking activities kept ECH prices firm. Subsequently, market sentiment turned sluggish after downstream restocking concluded, and as some ECH units restarted, upward momentum waned. Prices gradually entered a correction phase, with overall trading activity leaning bearish.

I. Tight Supply Expectations Support the ECH Market

This week, the average weekly capacity utilization rate for epoxy chloropropane was 38.69%, a decrease of 0.42 percentage points from the previous week. During this period, partial unit startups, shutdowns, load increases, or reductions occurred in regions including Jiangsu, Shandong, and Hebei. Specifically, units at Shandong Sanyue and Hebei Jiaao were shut down; units at Yihai Kerry Oils & Grains and Shandong Minji were restarted; units at Ningbo Huanyang and Qingdao Haiwan reduced loads; while units at Zibo Feiyuan increased loads. Netting these changes, overall ECH supply continued to decline compared to the previous week. Looking ahead, the Hebei Jiaao unit remains shut down with restart time TBD. Units at a major enterprise in Jiangsu and Shandong Minji have stabilized. Consequently, ECH market supply is expected to decrease further, though operational dynamics require continued monitoring.

II. Downstream Consumption Growth Falls Short of Expectations, Pressuring the Raw Material Market

From the perspective of downstream consumption structure, although propylene and glycerin raw material prices declined in November, industry production costs remain relatively high due to differences in process routes, continuously compressing profit margins for producers across all pathways. Currently, spot resource supply within the market maintains a tight pattern. Overall ECH consumption this period increased month-on-month, providing phased support on the demand side. As the core downstream sector, the epoxy resin industry achieved an average weekly capacity utilization rate of 49.11%, up 0.81 percentage points month-on-month. Weekly output rose to 42,400 tons, an increase of 1.68% month-on-month, corresponding to an ECH raw material consumption of 22,500 tons, which offers certain support to the spot market. However, future market driving forces are limited. Looking to next week, some epoxy resin production units plan to reduce loads, leading to an expected decline in downstream raw material demand. At present, downstream enterprises primarily rely on long-term contracts and the depletion of prior inventories, showing weak willingness to actively enter the market for new purchases. Limited release of incremental orders will clearly suppress ECH prices, with no substantial improvement expected in short-term demand.

III. Next Period Likely to Be Stable but Weak

It is projected that the domestic epoxy chloropropane market may maintain a weak, narrow-range fluctuation next week. On the cost front, propylene prices are expected to correct, and glycerin prices are likely to continue their downward trend, causing production costs across various process routes to shift lower simultaneously. However, the raw material side still possesses certain floor support, constraining the extent of ECH price declines. On the supply side, the tight spot pattern is expected to persist. Some units in Shandong, Hebei, and Jiangsu remain shut down or operating at reduced loads, leading to a slight contraction in domestic commercial volume. Additionally, since production enterprises prioritize fulfilling long-term agreement orders, available tradable spot resources are limited, providing phased support to market prices. On the demand side, the overall weak trend continues. The core downstream epoxy resin industry faces expectations of declining operating rates. Downstream enterprises remain cautious about purchasing high-priced raw materials, focusing mainly on executing long-term orders and depleting existing inventories. New orders are limited to essential restocking, lacking incremental growth in upstream raw material procurement demand. With weak demand support, market participants adopt a cautious and bearish sentiment. Producers' urgency to sell increases, intensifying market competition and pressuring trading activity. Overall, bearish factors currently dominate the market, making it easier for ECH price centers to fall than rise; however, constrained by cost floors, the room for price declines remains relatively limited.