US phenol market mired in supply woes

02 April 2010 19:18  [Source: ICIS news]

HOUSTON (ICIS news)--The US phenol market remains mired in supply constraints and rising feedstock cost pressure as the second quarter begins, market sources said on Friday.

However, participants said they would be optimistic about 2010 if operational issues that have plagued the market since December could be resolved in the short term.

The problems began with feedstock cumene.

In mid-January Citgo had production problems at its Corpus Christi, Texas, refinery, and went on allocation for cumene, according to sources. Citgo could not immediately be reached for comment.

In February, Sunoco permanently shut down its previously idled 145,000 bbl/day Eagle Point refinery in Westville, New Jersey. Processing units at Eagle Point were idled in early November.

The cumene market had already seen the closure of INEOS cumene unit in Texas earlier in 2009 due to weak phenol/acetone demand.

Production cuts and maintenance turnarounds in Asia had contributed to a big jump in acetone/phenol prices in that region in the past few months. US sellers worked several phenol/acetone cargoes to Asia during the first quarter, fully committing themselves and then running into cumene supply problems.

Phenol makers, already short of cumene due to supply constraints or credit problems in buying feedstocks, entered the cumene market to buy phenol.

As Sunoco had problems restarting a line at Haverhill, Ohio, its largest customers became frantic and entered the spot market, sources said. Sunoco could not be immediately reached for comment regarding the status of its Haverhill line.

Then, Dow Chemical declared force majeure (FM) for phenol in the Americas in March due to a broken heat exchanger at its Oyster Creek facility in Texas.

Short term availability became a problem, specifically for spot buyers, and those who typically purchase from Dow or Sunoco, a buyer said.

Now, sources said Shell had begun a 2-4 week planned turnaround in Deer Park, Texas, on 1 April.  Shell would not comment on the status of its Deer Park operations.

Dow has completed repairs at its Oyster Creek facility in Texas and would be returning online during the week, sources said. Dow could not be reached for immediate comment.

Sunoco was also ramping up production at its Haverhill, Ohio location, according to sources.

The global supply of phenol remained tight, with Europe and Asia both mostly out of the spot market. Meanwhile, global demand for polycarbonate (PC) and bisphenol-A (BPA) is rising, causing demand for phenol on the US Gulf to increase above volume forecasts.

April contracts for European BPA were expected to move up significantly on the back of restricted availability, firming demand and higher feedstock costs, a trader said.

The tightness was being felt throughout the chain. BPA sellers are looking for phenol and they cannot get it. Acetone prices are also moving up like crazy, the trader said.

Looking ahead from the sidelines of the National Petrochemical & Refiners Association (NPRA) International Petrochemical Conference in San Antonio, Texas, this week, many buyers and sellers said they still expected the first half of the year to be short, but by the third-quarter global supply would ease and US spot prices could return to benzene plus 10-12 cents. Spot prices have been double that or more, according to buyers.

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Author: Heather Doyle

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