Chemical profile: Phenol

23 May 2005 00:01  [Source: ICB Americas]

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PHENOL

May 23, 2005

US PRODUCERS

CAPACITY*

Dakota Gasification, Beulah, N.D.

35

Dow, Freeport, Tex.

650

Georgia Gulf, Pasadena, Tex.[1]

160

Georgia Gulf, Plaquemine, La.

500

Ineos Phenol, Theodore, Ala.

1,100

JLM, Blue Island, Ill.

95

Merisol USA, Houston, Tex.

35

Mount Vernon Phenol Plant Partnership, Mount Vernon, Ind.

710

Noveon Kalama, Kalama, Wash.

75

Shell Chemical, Deer Park, Tex.

1,180

Sunoco, Haverhill, Ohio[2]

1,050

Sunoco, Philadelphia, Pa.

1,100

Total

6,690

[1] Plant is idle.

[2] 350 million pounds of plant's capacity is idle.

*Millions of pounds per year. Nearly 98 percent of US phenol capacity is based on oxidation of cumene to form cumene hydroperoxide, which is then cleaved into phenol and acetone. Noveon Kalama uses a toluene oxidation process, producing benzoic acid as an intermediate. Merisol recovers phenol from petroleum caustic wash streams, and Dakota Gasification obtains phenol as a by-product of the company’s coal gasification process. The Mount Vernon Phenol Plant Partnership is a joint venture in which Citgo and General Electric Company are partners. The majority of Citgo’s cumene production at Corpus Christi, Tex., is sold to this plant, which produces phenol and acetone for sale primarily to GE for the production of plastics. GE Advanced Materials operates the plant in Mount Vernon, Ind. Merisol USA is 50 percent owned by Meri-chem and 50 percent by Sasol, South Africa. In early 2002 Frontier Oil permanently closed its 110 million pound-per-year phenol unit at El Dorado, Kan., diverting benzene from cumene production to the gasoline pool. Shortly afterwards, Georgia Gulf idled its 160 million pound-per-year phenol plant at Pasadena, Tex., citing weak domestic demand and excess industry capacity. More recently, Sunoco mothballed a 350 million pound-per-year phenol line at Haverhill, Ohio, at the end of 2003. Profile last published 5/20/02; this revision, 5/23/05.

DEMAND

2003: 4,164 million pounds; 2004: 4,232 million pounds; 2008: 4,765 million pounds, projected. Demand equals production plus imports (2003: 12 million pounds; 2004: 7 million pounds) less exports (2003: 1,114 million pounds; 2004: 1,129 million pounds).

GROWTH

Historical (1999-2004): -2.7 percent per year; Future: 3 percent per year through 2008. While US phenol production increased modestly during the period, at the average annual rate of 1.6 percent, the overall phenol demand numbers were heavily influenced by trade. During the period, imports decreased from 402 million pounds to 7 million pounds, a loss rate of 55.5 percent per year, while exports grew from 378 million pounds to 1,129 million pounds, an increase of 24.5 percent per year.

PRICE

Historical (1999-2004): High, 68c. per pound, spot, Gulf, tanks, frt. equald.; low, 15c., same basis. Current: 65c. to 68c., same basis.

USES

Bisphenol-A, 48 percent; phenolic resins, 25 percent; caprolactam, 11 percent; alkylphenols (p-nonylphenol, p-dodecylphenol), 4 percent; xylenols, 4 percent; aniline, 2 percent; miscellaneous (including adipic acid and salicylic acid), 6 percent.

MARKET PERSPECTIVE

The phenol industry has changed markedly in the past five years. Overcapacity, coupled with low margins and falling demand led to reorganization and rationalization in the US industry. Significant moves included Sunoco's acquisition of Aristech from Mitsubishi Corp. and the purchase of Phenolchemie from Degussa by Ineos. Additionally, since 2001, 620 million pounds per year of phenol capacity has been idled or permanently closed. Despite this rationalization, it appears that there is still sufficient phenol capacity in the US to meet demand, including exports. In the fourth quarter of 2003 and continuing into the first half of 2004, cumene shortages appeared that caused phenol market tightness. During this time nearly every cumene producer in the US experienced some downtime due to mechanical problems or shortage of propylene feedstock. Concurrently, there was a global shortage of benzene, resulting in historical high prices for this key cumene feedstock. As a result, cumene pricing reached its historical high in 2004, which caused phenol prices to more than triple by the end of 2004. With nearly half of phenol's domestic demand going into bisphenol-A (BPA), used primarily for polycarbonate resins, phenol has great sensitivity to whatever happens to polycarbonate. Since 1999 to 2004, US demand for polycarbonate resin has increased by 1.2 percent annually. This seemingly small growth for the period is due to the demand constriction caused by the recession of 2000-2001. Since then, the markets have fully recovered, and polycarbonate growth is back on track. Another sector that has been going strong is phenolic resins. These are chiefly used in wood products and account for 25 percent of phenol's demand. Driven by the prolonged housing boom in the US, wood products that contain phenolic resins have shown substantial growth.

OUTLOOK

The phenol market greatly improved last year, in conjunction with the strengthening of the US economy. The phenol market, driven primarily by polycarbonate for optical media, architectural and transportation glazing, and automotive parts, and phenolic resins for construction, is directly correlated with economic activity. Consequently, phenol is projected to grow at 3 percent annually, through 2008 with the expanding economy. Pricing should be stable and possibly exhibit downward pricing pressure in the short term, following reductions in benzene and propylene pricing as crude oil pricing comes down from its record high in April of more than $58 per barrel.


By: Mark Kirschner
+1 713 525 2653



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