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Brazil tops China as top US ethylene dichloride export market

Highlights

China tariffs prompt EDC trade flow to shift

Braskem EDC shutdown increases Brazilian demand

Houston — Brazil displaced China as the top export market for US-origin ethylene dichloride, a key intermediate in manufacturing construction staple polyvinyl chloride, according to data from the US International Trade Commission.

In the first nine months of 2019, China received 73,628 mt of US-origin EDC, down 57% from 173,034 mt in the same period of 2018. At the same time, Brazil received 213,546 mt of US material, three times more than 69,284 mt in the January-September period last year.

The shift stemmed from two things. First, EDC is among US products that have faced 25% tariffs from China since August last year amid the US-China trade dispute. US EDC flows to China started waning in late spring last year after China named it among possible targets for tariffs on US products in response to tariffs on Chinese goods that the US was considering, so Chinese buyers started seeking material from non-US markets and US sellers sought other destinations.

Second, Brazilian petrochemical producer Braskem shut its sole EDC plant in Brazil in May, in addition to upstream salt mining operations and the larger of its two chlor-alkali plants, after a government report linked the salt extraction to geological damage in Maceio, the capital city of the state of Alagoas.

Those shutdowns made Braskem dependent on EDC imports to maintain downstream PVC production, and shipments began arriving regularly in July, according to sources familiar with company operations.

Braskem CEO Fernando Musa said on Monday during a quarterly earnings call that the company aims to obtain salt from other areas and restart the shut plants in the first half of 2020. Braskem announced last week that it would permanently shut the 44-year-old salt mining operation in Maceio, and Musa explained further that the company plans to obtain salt from the state of Rio Grande do Norte in northeast Brazil. Braskem also is scouting possible locations in rural Alagoas to establish a new salt mining operation as well.

Once the company has salt to feed the chlor-alkali output, Braskem can restart the shut plants, he said.

OVERALL EDC EXPORTS UP

Overall, US EDC exports through September rose 41% on the year to 1.1 million mt, with more flows targeting Southeast Asia and the Middle East, the USITC data showed.

India remained the second-largest export market for US material with 153,343 mt, up nearly 25% from the same period of 2018.

Egypt displaced South Korea as the third-largest market with 139,915 mt, more than four times the year-ago flows. Thailand received 58% more at 127,205 mt, and Japan received 111,711 mt, also more than four times its receipts in the January-September period of 2018.

US EDC prices were last assessed November 12 at $220-$230/mt FOB USG, its lowest point since April 24, 2018. Prices reached a 2019 high of $365-$375/mt FOB USG on March 12 this year, but came under pressure as supply built up amid higher chlor-alkali rates in late spring and through the summer.

However, market sources expect EDC prices to strengthen in the coming weeks on tightening supply amid expectations of falling chlor-alkali rates in response to weak caustic soda prices.

-- Kristen Hays, kristen.hays@spglobal.com

-- Edited by Kshitiz Goliya, newsdesk@spglobal.com

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