Will Demand Return to the ECH Market in 2019?

Will Demand Return to the ECH Market in 2019?

September 27, 2019 | Chemicals Blogs

Epichlorohydrin (ECH) is an epoxide and a colorless liquid. It is conventionally produced from allyl chloride, which itself is derived from the main feedstock, propylene. It is mainly used in the production of epoxy resins, which account for more than 90% of global ECH consumption and are expected to continue driving the market. The paints and coatings industry are the largest end-user for epoxy resins, but they are also widely used in industries such as automotive, construction, and renewable energy equipment among others.

Besides epoxy resins, ECH is also utilized in the production of synthetic glycerin and is also used in the production of some epichlorohydrin elastomers and wet-strength resins. The global epichlorohydrin market is anticipated to grow at CAGR of 4% to 5% between 2019 to 2025. China is the biggest producer of ECH and more than 50% of the global capacity is concentrated amongst Dow Chemical, Shandong Haili, Solvay, and Formosa Plastics.

Regional Insights and Outlook 2019


The supply of ECH in Europe has remained tight in Q2 2019 due to turnarounds and production constraints, leading to rising imports and increasing prices. ECH imports from China doubled in May, despite environmental regulations causing production constraints in China. However, it is assessed against the subdued demand for epoxy resins in China.

In July, ECH contracts almost reflected the extension of June prices. However, with a marginal decline due to a reduction of upstream propylene prices, coupled with muted demand since Q2 2019 from downstream for epoxy resins amid limited supply, balanced the ECH market.

Outlook 2019: Supply flexibility is anticipated to remain limited until Q3 2019 due to output challenges and plant turnarounds leading to a lack of availability of spot volumes, which buyers could obtain only by early September 2019. Demand is likely to remain muted due to low seasonal demand from epoxy resins, coupled with sluggish economic growth until Q3 2019. If the demand for epoxy resins continues to remain low, it could prevent the price from increasing, diminishing the effects of the supply shortage by Q4 2019.


Like Europe, ECH supply in domestic markets, especially China, is tight. This is due to the prolonged outages of two major plants — which together account for more than 30% of the total nameplate capacity — that was caused by continued inspection for safety and environmental regulations. Jiangsu Haixing Chemical and Shandong Haili are temporarily shut since October 2018 and March 2019 respectively, due to technical issues. This has impacted domestic ECH prices, which have seen double figure increases during Q3. Furthermore, ECH prices rose sharply in July, which caused limited buying interest from epoxy resin producers. Moreover, Asian regions outside China reflect a similar situation as supplies are limited due to heavy allocation of ECH volumes to contractual customers leading to unavailability of spot volumes.

Outlook 2019: The supply situation is anticipated to remain tight and is not likely to stabilize until Q3 or early Q4 2019, whereas the demand is likely to remain weak as epoxy resin producers are considering restricting production to reduce costs on account of rising ECH prices.


The ECH market outlook indicates a bearish tone in the Asian and European markets. The tight supply situation is caused by turnarounds since Q2 2019 and is likely to persist until Q3 2019, which may support increases in the price of ECH. Moreover, buyers seeking spot volumes may find themselves unable to procure it due to limited supply flexibility. On the other hand, buyers are likely to hold ECH purchases on account of muted demand, the macro-economic scenario and production cuts, which could suppress ECH price increases to some extent.

According to several market participants, the ECH market has experienced weak demand from epoxy resins mostly throughout the year and may normalize only if macro-economic factors turn favorable by Q4 2019. According to various sources, the demand outlook seems dull amid weak macroeconomic indicators surrounding the 2020-2021 period.

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