NewsFlashUS phenol settles up 2 cents/lb

02 June 2008 18:08  [Source: ICIS news]

HOUSTON (ICIS news)--US phenol contracts for May settled by up to 2 cents/lb ($44/tonne) for most accounts, buyers and sellers confirmed on Monday.

Contract prices moved up to 80-85 cents/lb FRT EQ (freight equalised), in line with a May benzene hike, according to data from global chemical market intelligence service ICIS pricing.

Phenol hikes were based on high feedstock costs, which have been squeezing producer margins all year, a seller said.

US May benzene contracts previously moved up by 12 cents/gal to $3.87/gal. The May US cumene formula contract price increased by 5% to 60.92 cents/lb FOB (free on board), in line with higher feedstock benzene and propylene costs.

Although demand was lacklustre, supply was snug, a seller said. Industry operating rates were low as producers carefully managed production in the current high-cost environment.

Downstream demand from the resin sector has been falling since 2006, industry sources said, with a reversal yet to be had.

Canada-based Arclin suspended start-up operations at its new Sexsmith resin plant in Alberta, citing reduced demand for adhesives in the region.

Demand from the polycarbonate (PC) sector was also shrinking, market participants said, due to the weak US automotive and construction industries.

Producers, however, continue to be faced with ever-rising feedstock costs.

The June benzene contract settled at $4.31/gal ($1,293/tonne) for a gain of 44 cents/gal, pending confirmation, producers and aromatics traders said on Friday.

If confirmed at $4.31/gal, the June benzene contract would mark a new record high. The previous record high benzene contract was $4.20/gal in May 2007.

The benzene hike could push June phenol prices up by 6 cents/lb, a seller said. Phenol contracts generally do not settle until the end of the month or one month late.

In hopes of a solution to squeezed margins, at least one producer has stepped out with energy surcharges.

US producer Georgia Gulf notified its customers this week it would implement an energy surcharge on all phenol and acetone invoices effective on 1 June, due to high natural gas costs.

Major US phenol sellers include Georgia Gulf, Shell, Sunoco and INEOS Phenol.

For more on phenol, visit ICIS chemical intelligence
To discuss issues facing the chemical industry, go to ICIS connect

By: Heather McGuire Doyle
+1 713 525 2653

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