Chemical profile: Phenol

17 November 2008 00:00  [Source: ICB]

DEMAND

2006: 4.47bn lbs (2m tonnes) 2007: 4.335bn lbs 2011: 4.69bn lbs, projected. Demand equals production plus imports (2006: 3m lbs 2007: 3m lbs) less exports (2006: 1.203bn lbs 2007: 1.106bn lbs). Source: ICIS Chemical Business US ITC

GROWTH

Historical (2002-2007): -1.1%/year (negative). Future: 2%/year through 2011. Source: ICIS Chemical Business

PRICE

Historical (2002-2007): High, 71 cents/lb, spot, US Gulf, FOB (free on board). Export low, 19 cents/lb, same basis. Current: 68-72 cents/lb, same basis. Current contract pricing: 86-91 cents/lb, same basis. Source: ICIS pricing

USES

Bisphenol-A (BPA), 45% phenolic resins, 28% caprolactam (capro), 11% alkylphenols (p-nonylphenol, p-dodecylphenol), 4% xylenols, 4% aniline, 2% miscellaneous (including adipic acid and salicylic acid), 6%. Source: ICIS Chemical Business

MARKET PERSPECTIVE

Phenol's demand is largely determined by its derivatives, particularly BPA and phenolic resins. These two derivatives respectively account 45% and 28% of phenol's demand.

The largest market for BPA is polycarbonate (PC) resins, which account for approximately 75% of US demand. PC resins consumed in automotive applications accounted for about 20% of the total demand. The resins are used in place of traditional materials such as metal and glass in automotive components. Glazing and sheet uses, such as architectural, security and transportation, make up another 20% of PC consumption. Optical media, including CDs and DVDs also account for 20% of the PC resin market. PC resin consumption in the optical media sector has been slowing however, as competing technologies (MP3 players, high-internet bandwidth and USB drives) take away some share of the electronic storage sector. The slowing economy has also softened BPA demand in all its application sectors.

Phenolic resins are chiefly used in wood products that are consumed in home construction - plywood and fibrous and granulated wood products. Demand for wood-based products is influenced by the strength of the construction industry and the overall health of the economy. This market sector closely tracks GDP growth and housing construction growth. The slump in the US housing market that began in 2006 and continues into 2008 has had a large negative impact on total phenolic resin consumption during 2004-2007, and will have even more of one this year.

OUTLOOK

Phenol demand is being adversely affected by the general economic slowdown and downturn in housing construction. Assuming a correction will begin by mid to late-2009, phenol growth demand for the forecast period is projected to be 2%/year. With crude oil now trading in the mid $60s/bbl range, benzene (and thus cumene) pricing should be stable for the short term, allowing producers to improve their margins.


US PHENOL CAPACITY, MILLIONS OF LBS/YEAR

Company Location Capacity
Blue Island Phenol Blue Island, Illinois 95
Dakota Gasification Beulah, North Dakota 35
Dow Chemical Freeport, Texas 650
Emerald Performance Materials Kalama, Washington 75
Georgia Gulf Pasadena, Texas* 160
Georgia Gulf Plaquemine, Louisiana 500
INEOS Phenol Theodore, Alabama 1,200
Merisol USA Houston, Texas 35
SABIC Innovative Plastics Mount Vernon, Indiana 710
Shell Chemical Deer Park, Texas 1,300
Sunoco Haverhill, Ohio** 1,050
Sunoco Philadelphia, Pennsylvania 1,100
TOTAL 6,910

SOURCE: ICIS CHEMICAL BUSINESS
*Plant has been idle since second quarter, 2002.

**350m lbs/year of plant's capacity is idle.

Nearly 98% of US phenol capacity is based on oxidation of cumene to form cumene hydroperoxide, which is then cleaved into phenol and acetone. Emerald 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.

In January this year, JLM Industries of Blue Island, Illinois, sold its cumene and phenol manufacturing facility to Blue Island Phenol, a company formed for the purpose of the acquisition. Under the terms of the deal, JLM will continue to manage the facility and market products produced at the plant. Blue Island Phenol is owned by Wisconsin-based Plastics Engineering.

In 2005 INEOS Phenol increased phenol capacity at Theodore, Alabama, by 8%, raising capacity to 1.2bn lbs/year. Then in 2006, Shell increased the capacity of its Deer Park, Texas, phenol plant by 10%, going to 1.3bn lbs/year from 1.2bn lbs/year. The SABIC Innovative Plastics location was a joint venture (JV) of CITGO, General Electric, and JLM Industries, before SABIC bought GE Advanced Materials. Merisol USA is a 50:50 JV between Texas-based Merichem and South Africa-based SASOL. In 2006, Sun Capital Partners acquired Noveon Kalama from Lubrizol and renamed it Emerald Performance Materials.

Profile last published May 23, 2005

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