Reduced Europe phenol rates boost acetone market

12 September 2008 12:12  [Source: ICIS news]

LONDON (ICIS news)--Poor demand for phenol has led European to producers to cut back operating rates, which has tightened acetone supply potentially forcing up spot prices, said sellers on Friday.

 

“Acetone demand is healthier than for phenol. Producers have cut rates because of poor phenol demand. So, we hope we can improve margins on acetone as a result, especially if propylene falls in the fourth quarter,” said one manufacturer.

 

Market sources speculated this week that demand for phenol in 2008 would be 5-15% lower than last year, depending on location and product.

 

Weaker than expected off-take was noted from major phenol derivatives polycarbonate, epoxy resins and caprolactam.

 

Given that acetone is a by-product of phenol production, any cut in rates immediately changes the volume of acetone produced.

 

Acetone spot prices moved up in early September to the mid-€800s/tonne (high $1,100s/tonne) FD (free delivered) NWE (northwest Europe), with many sellers still pushing for €900/tonne FD NWE.

 

Acetone suppliers said they were confident they could align prices closer to upstream propylene in the fourth quarter, given firm fundamentals and the softer outlook upstream.

 

While the recent strengthening of the US dollar made imports less likely, acetone consumers said they did not see a shortage of supply, with contract volumes widely seen as sufficient.

 

Looking further ahead, there is little scope for optimism in October for phenol sellers.

 

“Yes we would welcome another drop in raw material benzene prices from a margin perspective but wouldn’t expect it would trigger a demand increase,” said a producer.

 

“The derivative markets are fundamentally quiet. This has to do with economics at end-user level - weaker car industry, less spending, poor housing market,” added another.

 

A fire in the Channel Tunnel on Thursday reportedly involving a railcar carrying phenol was said to have had little impact on the European market.

 

($1 = €0.72)

 

For more on phenol visit ICIS chemical intelligence

Listen to Will Beacham's account of his day transporting phenol in a special report on ICIS radio

By: Edward Cox
+44 20 8652 3214

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