Epichlorohydrin Demand Increases Rapidly


Basic supply/demand balance in the world

The capacity of epichlorohydrin (ECH) in the world was more than
1.3 million t/a in 2005. 62% of the capacity was distributed in
the United States, Western Europe and Japan. The capacity in Dow,
Solvay and Shell accounted for around 51% of the world total.
   Major ECH export countries in the world are the United States
and Japan. Asia and Eastern Europe are major import regions. The
supply and the demand in Western Europe are basically balanced.
There is an overall supply/demand balance in the world today.
The United States, Western Europe and Japan are major
consumption regions. With the development of epoxy resin and
polycarbonate sectors, the demand of ECH in Asia and especially
China is growing rapidly. The apparent consumption of ECH in
China reached 200.4 thousand tons in 2005, an increase of 17.5%
over 2004.

Serious supply deficit in China

China has 4 ECH producers today with a total capacity of 114
thousand t/a. The output was only 90 thousand tons in 2005 and
fell far short of the domestic market demand. The product
self-sufficiency rate was only 44.9% in 2005 and import had to
be made in great quantities to bridge the supply deficit in the
domestic market.
   The huge market deficit, the sound development prospect and
the satisfactory profit margin have attracted many domestic
firms to construct new ECH units. Jiangsu Yangnong Chemical
Group started to make access to the ECH market. Its 30 thousand
t/a ECH unit is expected to start production in the second half
of 2006. Jiangsu Anpon Electrochemical Co., Ltd. also intends
to invest RMB260 million in the construction of a 20 thousand
t/a ECH unit. The project passed the evaluation organized by
Jiangsu Environmental Engineering Consulting Center in early
2006. Construction has already started and the project is
expected to complete and put on stream in June 2007. Bluestar
New Chemical Materials Co., Ltd. launched a 30 thousand t/a ECH
project in Yancheng, Jiangsu province in July 2006. With the
completion of these projects, the supply deficit of ECH in China
will be eased in the next few years.

Rapid demand growth

  (1) Epoxy resin: The major consumption sector for epoxy resin
is the electronic/electric sector. Other consumption sectors
include coatings, composite materials, construction materials
and adhesives. These sectors have developed rapidly in recent
years and their demand of epoxy resin has increased constantly.
The demand of ECH in epoxy resin reached around 180 thousand tons
in 2005. It is expected that epoxy resin will remain the major
consumption sector for ECH in the next few years.
  (2) Synthetic glycerin: The glycerin production in China
mainly uses the fat hydrolysis process. The demand of ECH in this
sector will therefore have no great increase.
  (3) Chlorhydrin rubber: Chlorhydrin rubber is a new variety
of synthetic rubbers. It has comprehensive properties such as
heat resistance, oil resistance, weather resistance and
oxidation resistance and is extensively used in automobile,
aviation and spaceflight sectors. The domestic demand is mainly
satisfied by imports today. The consumption of ECH in the
chlorhydrin rubber sector was around 4 thousand tons in 2005.
  (4) Others: The consumption of ECH in other sectors such as
glycidol ether, paper additives, flame-retarding agents, ion
exchange resins and surfactants was around 8 thousand tons in
2005.
   ECH in China was mainly used in the production of epoxy resin
and synthetic glycerin in the past and small amounts were also
used in the synthesis of chlorhydrin rubber. Owing to the
constant application expansion and drastic demand increase of
epoxy resin, the consumption proportion of ECH in epoxy resin
has reached around 90%.

Heavy import dependence

According to the customs statistics, the total import amount of
ECH in China was more than 110 thousand tons in 2005, an increase
of 13.3% over 2004. The import amount accounted for 55.3% of the
apparent consumption. Based on import sources, the import was
mainly made from Japan, Korea, Russia and Taiwan province.
   The price of ECH in China has presented an overall rising
trend in recent years. The price of imports produces a great
impact on the domestic market. The price of ECH in China had no
great fluctuations in the first half of 2005. The Ministry of
Commerce made a preliminary ruling on September 21st, 2005. It
was defined that there was dumping in the import of ECH
originated from Russia, Korea, Japan and the United States and
it was decided to take temporary antidumping measures in the form
of guarantee fund. (CCR2005, No. 28) The price of ECH in the
domestic market started to rise sharply and has been maintained
at a high level ever since.

Table 1  Major ECH Producers in China     (thousand t/a)
Producer                                           Capacity
Chlor-Alkali Plant of Sinopec Qilu Petrochemical Co.    32
Epoxy Resin Plant of Hunan Yueyang Petrochemical Co.    34
Tianjin Chemical Plant                                  28
Shandong Dongying Liancheng Chemical Co.                20
Total                                                   114
Source: CNCIC Chemdata

Table 2  Supply and Demand of ECH in China in Recent Years
    (thousand tons)
Year    2001    2002    2003    2004    2005
Output    44.7    60.0    90.0    73.0    90.0
Import    35.5    43.7    69.1    97.7    110.8
Export    0.7     0.2     0.3     0.2     0.4
Consumption    79.5    103.5    158.8    170.5    200.4
Source: CNCIC Chemdata