Chemical Profile - PHENOL

20 May 2002 00:00  [Source: ICB Americas]

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PHENOL    May 20, 2002

US PRODUCER

CAPACITY*

Dakota Gasification, Beulah, N.D.

35

Dow, Freeport, Tex.

650

Georgia Gulf, Pasadena, Tex.

160

Georgia Gulf, Plaquemine, La.

500

Ineos Phenol, Theodore, Ala.

880

JLM, Blue Island, Ill.

95

Merisol USA, Houston

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

940

Sunoco, Philadelphia

1,100

Total

6,360


*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 Inc. uses a toluene oxidation process with benzoic acid as an intermediate. Merisol USALLC recovers phenol from petroleum caustic wash streams, and Dakota Gasification Company obtains it as a by-product of the company's coal gasification process. The Mount Vernon Phenol Plant Partnership was established in 1987 by GE Holding, 49 percent, Citgo Petroleum, 49 percent, and JLM Industries, 2 percent. GE Plastics operates the plant at Mount Vernon, Ind. Merisol USA is 50 percent owned by Merichem and 50 percent by Sasol of South Africa. In March 2000, Shell Chemical Company added 500 million pounds at its Deer Park, Tex., plant. In June 2000, Phenolchemie, part of Degussa-Hls, opened its 880 million pound plant at Theodore, Ala. Then, in May 2001, Ineos Group acquired Phenolchemie. In February 2001, an investor group comprised of AEA Investors Inc., an affiliate of DLJ Merchant Banking Partners and DB Capital Partners Inc., acquired the performance materials division of BFGoodrich. In June that year, the former BFGoodrich performance chemicals segment, was named Noveon Inc. Kalama Chemical had previously been part of BFGood-rich's performance materials business. Sunoco acquired Aristech Chemical in January 2001, from Mitsubishi Corp. The deal did not include Aristech's acrylics business. Aristech had increased phenol capacity from 700 million to 940 million pounds at Haverhill, Ohio, in the fourth quarter of 1999. In July 2001, Solutia Inc. and JLM Industries Inc. agreed to end a commercial agreement to establish a new benzene-to-phenol plant because of weak market conditions. The plant would have been at Solutia's Pensacola, Fla., facility and would have used Solutia's AlphOx BtoP technology. In March 2002, Georgia Gulf Corp. idled its 160 million pound-per-year phenol plant at Pasadena, Tex., citing weak domestic demand and excess industry capacity. The plant will be down for at least six months. Frontier Oil and Refining Company recently closed the 110 million pound-per-year phenol unit (and cumene) at El Dorado, Kan., as the first step in increasing gasoline output. Texaco Refining and Marketing Inc. originally owned the refinery. In 1997, the plant became part of Equilon Enterprises LLC, a joint venture between Shell Oil Products and Texaco Refining and Marketing. Frontier bought the refinery in 1999. Profile last published 3/29/99; this revision, 5/20/02.

PRICE
Historical (1996-2001): High, 40.6 cents per pound, contract, US Gulf, tanks, frt. equald.; low, 30.7 cents, same basis. Current: 36.6 cents, same basis.

GROWTH
Historical (1996-2001): 1.8 percent per year; Future: 3.0 percent per year through 2005. The growth rate for the past five years appears small and is because of the nearly 8 percent drop in demand between 2000 and 2001. The average annual growth from 1995 to 2000 was 4.2 percent.

USES
Bisphenol-A, 41 percent; phenolic resins, 28 percent; caprolactam, 13 percent; alkylphenols, 5 percent; xylenols, 4 percent; aniline, 3 percent; miscellaneous, 6 percent.

DEMAND
2000: 4.87 billion pounds; 2001: 4.50 billion pounds; 2005: 5.07 billion pounds. Demand equals production plus imports, which were 119 million pounds in 2000, and 32 million pounds in 2001, less exports, which were 583 million pounds in 2000 and 624 million pounds in 2001.

STRENGTH
The temporary closing of Georgia Gulf's plant at Pasadena, Tex., and the departure of Frontier Oil from the phenol market has eliminated 270 million pounds of capacity or about 4 percent of capacity. This is helping to balance the oversupply situation and raises the industry operating rate to nearly 75 percent.

WEAKNESS
The phenol market continues to be hurt by overcapacity, flat pricing and weak demand. The market is yet another casualty of the global economic downturn as demand for bisphenol-A, the leading use for phenol, is down from reduced demand for polycarbonate and epoxy resins. Before 2001, US polycarbonate had been enjoying growth of almost 5 percent per year. Restoration of phenol demand growth depends on economic recovery. By the beginning of this year, producers were forced to cut back production to about 70 percent of capacity.

OUTLOOK
With the improving economy this year, phenol's derivatives will begin a new market pull that will translate into a return to growth for phenol. US phenol demand is projected to grow at 3 percent annually through 2005.





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