European chemical profile: Phenol

27 September 2010 00:00  [Source: ICB]

Correction: In the article headlined: "European chemical profile: Phenol," please read the capacity for CEPSA Quimica in the table as 450,000 tonnes/year, instead of 350,000 tonnes/year. A corrected story follows.

Phenol's main uses are in bisphenol A (BPA), phenolic resins, caprolactam (capro), alkylphenols, aniline and adipic acid. BPA, used mainly in polycarbonate (PC) is the largest outlet, followed by phenolic resins.

Demand in Europe is very healthy and stronger than expected, showing a significant improvement on 2009. Players believe demand is up by around 20% this year. A key driver is tight Asian markets, where demand for BPA (into PC for the automotive sector) is particularly strong.

Meanwhile, supply in Europe has been plagued by planned and unplanned outages this year, keeping material short. Although full production resumed in September, markets remain tight, with buyers pushing to take full contractual volumes and having no surplus available for spot or export sales. Demand is predicted to stay strong through the fourth quarter. Spain's CEPSA Quimica mothballed a 150,000 tonne/year line in Huelva in June, citing poor profitability and a surplus of acetone coproduct.

The European phenol contract price generally mirrors developments in the feedstock benzene market. A steep jump in benzene prices forced April phenol contracts to this year's high of €1,377-1,417/tonne FD (free delivered) NWE. (Northwest Europe) Since then, prices dropped each month until turning up again in September. Formula-related contracts rose by €35/tonne, reflecting the full hike in benzene costs, to a range of €1,197-1,237/tonne.

Spot numbers for European trade remained notional at €1,180-1,280/tonne FD NWE as very little material was available. A buoyant export market has pushed prices up to $1,550-1,650/tonne FOB (free on board) Rotterdam.

There are three synthetic routes to phenol, with cumene-based technology the dominant process. A few producers use an older process based on the hydrolysis of chlorobenzene. A third is based on the liquid-phase oxidation of toluene.

Development work is concentrated on technologies that avoid the coproduction of acetone. Benzene-based processes without acetone by-product have been developed by Russia's Boreskov Institute of Catalysis with US producer Solutia, and Japan's Mitsui Chemicals.

UK-based Shell Chemicals has developed a route that coproduces both phenol and methyl ethyl ketone (MEK). Although the cost of making phenol is higher than the conventional cumene route, the large by-product credit for the MEK is said to more than compensate.

Worldwide demand growth is put at 4-5%/year, with the strongest growth in Asia, particularly China.

Industry predictions put Asian growth at more than 6%/year, reaching over 5m tonnes/year by 2015, with China's demand to grow by nearly 10%/year to 2015, when it will reach 1.97m tonnes/year and account for 40% of regional demand. Growth in Europe is at at 3-4%/year.

BPA remains the main driver of growth. Michael Foeste, phenol product manager at Germany-based trader Mitsui & Co. Deutschland has forecast that demand in Asia for BPA into PC will grow by about 4%/year to 2015, with epoxy resins growth also staying strong at 5%/year over the next five years.

No further investment is expected in Europe in the mid term, with projects focused on Asia, notably China, and the Middle East.

Despite China's buildup in capacity, it will remain short on phenol, although the shortfall is expected to fall from 340,000-400,000 tonnes in 2010 to 66,000 tonnes by 2015.

Profile last published October 29, 2007

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