MIDLAND, MI—According to the Dow Chemical Co., overall global consumption of epoxy resins has improved since the beginning of 2001. Consumption has been so great that the gap between demand and supply has considerably closed.

However, producers may not be out of the woods yet. "Though the market has seen improving demand, epoxy producers are still struggling to restore profit margins to reasonable levels," says Phil Cook, global vice president for epoxy products and intermediates at Dow. "Feedstock prices jumped considerably this year, putting everyone under tremendous pressure to increase epoxy prices. We anticipate a significant increase in epoxy pricing in the first quarter of 2003 in all geographies."

Cook blames the narrow profit margins on the steady decrease in oil, gas and other petrochemical pricing and declines in epoxy resin prices. These factors motivated some major epoxy resin consumers to develop lengthy contract terms with their customers. This contributed to the difficulty epoxy manufacturers have experienced in securing price increases and has contributed to the loss of margin. Consequently, the epoxy producers have insufficient margins to absorb the recent jumps in feedstock prices.