Ethylene Dichloride Prices Hit by APAC Construction Slump and European Market Decline

The prices of Ethylene Dichloride (EDC) have shown a mixed trend across different regions. In China, EDC prices have inclined, while in Japan, they have remained stable. The construction sector's downturn in much of the APAC region, influenced by China's national debt issues and a labour shortage in Japan, has contributed to this stability. Similarly, in Europe, EDC prices have declined, influenced by the decline in the upstream ethylene and the downstream PVC market.

In the European region, during the initial week of June 2024, the Ethylene Dichloride (EDC) market witnessed a decline of 3.2%, with prices dropping from USD 310/MT to USD 300/MT in the Dutch market. This decline was primarily due to the falling prices of crude oil, an upstream input for EDC production. In Europe, the decrease in building permits and persistently high construction costs indicate a challenging year ahead for the construction industry. However, the prices of existing homes are increasing again, which could potentially foster sales of new builds. Overall, the combination of stable or declining upstream and downstream market conditions has contributed to the observed trends in EDC prices across different regions.

During the week ending on June 7th, 2024, Ethylene Dichloride (EDC) prices in Chinese market saw an increase. Despite declines in upstream crude oil and naphtha prices, EDC prices rose due to several market dynamics. Increased activity by manufacturers, leading to higher demand, was a key factor driving the price incline. Additionally, a decline in EDC inventories exerted slight upward pressure on prices. The prices of downstream Polyvinyl Chloride (PVC) also remained stable, indicating that downstream market conditions had no adverse effect on EDC prices. In China, the construction sector remained in decline due to the country's national debt situation. National output of cement continued to fall, with many larger companies reporting weakening sales and profits. However, this trend seemed to be slowing, with some producers managing to grow revenue, profits, and sales volumes. Concerns about potential systemic financial risks persist due to China's substantial public, private, and concealed debt levels.

In Japan, EDC prices remained constant. The decline in the upstream market of ethylene and the stagnant derivative market of PVC supported EDC prices in Japan. Decline in trading activities of EDC due to low market participant activity also kept prices stable. The Japanese construction sector remained stagnant, further supporting EDC prices.

According to ChemAnalyst's projections, there is an anticipated decline in Ethylene Dichloride (EDC) prices in the forthcoming weeks in Europe. Economists expect growth to return this quarter, aided by tax cuts and wage hikes. However, higher import costs due to a weaker yen are seen squeezing consumption, while disruptions at some automakers are also likely to introduce volatility to the market, potentially leading to a decline in EDC prices. In the APAC region, a similar trend is expected due to a decline in the construction sector, with countries like China and Japan facing unique challenges. China continues to struggle with its national debt issues, affecting construction activity, while Japan is dealing with labor shortages in its construction sector. The continuous decline in crude oil prices globally is another factor that may contribute to the decline in EDC prices. As crude oil is a key upstream input for EDC production, its price reduction tends to lower the production costs for EDC, thereby putting downward pressure on its market prices. This combination of economic conditions and sector-specific challenges is expected to drive down EDC prices in the near term.