By Zeng Xianfen, Oilchem

Development status

China's epoxy resin capacity in 2018 was 2.3 million t/a, flat year on year. The output was 1.12 million tons, marking a year-on-year decline of 6.67%. The changes in China's epoxy resin supply and demand during 2014-2018 are shown in Figure 1. The apparent consumption in 2018 was 1.33 million tons, and the self-sufficiency rate dropped below 85%.

Figure 1  China’s epoxy resin supply-demand, 2014-2018

   Epoxy resin is mainly used in the fields of powder coatings and paints, electronic and electrical appliances, composites and adhesives in China, with their consumption proportion at 40.41%, 38.06%, 12.99% and 8.55%, respectively. Other emerging downstream sectors have been developing slowly due to technical issues, capping the growth in demand for epoxy resin.

   Most of the domestic epoxy resin plants produce low-end grades and users have to secure specialty grades from overseas. This explains why there remains a certain amount of imports though domestic capacities are oversupplied. However, with the continuous R&D and innovation of technology in China, the dependency on imports is decreasing. In 2018, the import volumes, mainly originated from Taiwan, South Korea, Germany and the USA, were at 269 500 tons, down 5 300 tons year on year. The export volumes were 57 800 tons, taking a decline of 13 700 tons or 19.16% from a year ago.

Slow capacity expansion

   China's epoxy resin capacity has been growing at a slower pace since 2014. The capacity in 2018 was reported to take an increase of 222 000 tons or a growth rate of 10.68% compared with the total capacity in 2014; the output increased from 1.09 million tons to 1.12 million tons during the period, an increase of 2.94%. Operating rates have been maintained low, only around 50% in 2018, due to an excessive supply in the domestic epoxy resin industry. 

Figure 2  China’s epoxy resin capacity and output, 2014-2018

Low growth pace in downstream demand 

   The coating sector, one of the most important derivatives of epoxy resin, sees its growth rate drop to below 5% as a result of tightening environmental protection policies. In 2018, the demand for epoxy resin in China's coatings industry was about 538 100 tons.

   Another major application field – the electronics sector has been fueled significantly by growing needs for automobile electronics and printed circuit boards in recent years. With the rapid growth in China’s automobile electronics industry, the demand for epoxy resin hit about 506 800 tons in 2018. 

   Composite materials are mainly used in the fields of aerospace, automobile, chemical textile, machinery manufacturing, medicine and construction, providing broad coverage in many sectors. The technology and product quality of China's composite materials continue to improve, implying a bullish market outlook. In 2018, the demand for epoxy resin in China's composite materials industry was about 173 000 tons.

   The consumption of epoxy resin in China’s adhesive industry is small, roughly at 113 800 tons in 2018.

Frequently volatile epoxy resin prices

   China's epoxy resin prices were volatile in the first half of 2019. Specifically, the prices of liquid epoxy resin E-51 were averagely at RMB18 850.82/t, with the highest at RMB20 500/t and the lowest at RMB16 800/t; the prices of solid epoxy resin E-12 were averagely at RMB16 250/t, with the highest at RMB17 500/t and the lowest at RMB14 900/t.

   During the period, the gross profits of E-51 rose and then fell, with an average level of RMB2 030.35/t, down by RMB1 606.11/t or 44.17% compared with the same period of last year.

Supply-demand prospect

   Nowadays, China's epoxy resin industry presents structural oversupply, but with the changes in market situation and adjustment in policies, downstream demand will gradually concentrate on large plants. Accordingly, big producers will intend to expand capacity while small and mid-sized ones will be under heavier pressure. The likely expansion of China's epoxy resin capacity is shown in Table 1. It is estimated that the capacity will increase by 535 000 t/a from 2019 to 2025; the import volumes will not decrease sharply and the export volumes will be largely stable. 

  Table 1   Chinese epoxy resin expansion plans

   In the future, demand growth in the coating sector is likely to be almost in line with GDP growth; demand in the electronics and electrical sector will stabilize and the growth pace will slow down slightly; demand from composite materials will stabilize, with no rapid growth to reoccur due to wind power policies; the healthy development in real estate and home decoration markets will enhance the application of epoxy resin in the field of fine seams and epoxy floor rapidly.