OUTLOOK ’11: Europe phenol to remain tight, demand strong

30 December 2010 11:06  [Source: ICIS news]

By Julia Meehan

China demand helps keep phenol tightLONDON (ICIS)--European phenol availability will remain tight on strong domestic and export demand for the petrochemical and its derivatives, market sources said.

Bisphenol  A (BPA), which accounts for 30% of phenol demand, is expected to remain strong throughout 2011 and into 2012, largely in the key Chinese market but also in Europe, and this is expected to compound an already tight position for phenol globally.

“We are preparing for the [Christmas] run on a slower pace but expect healthy demand in January. We are also expecting phenol to be structurally more expensive than 2010 because of the lack of capacities. We hear phenol producers will be better covered. We are waiting to see,” said a major BPA producer looking ahead to 2011.

“In Europe, the BPA market could easily repeat the tightness of 2010. All players are tending to be more cautious, though. The question is whether it will influence prices or other parts of the contracts. Everybody wants to be safe [with regards to volumes] and more material will be freely negotiated rather than held by contract,” the BPA producer added.

Since the economic downturn took hold in 2008, CEPSA Quimica has idled one of its three phenol lines in Huelva, Spain, and Polimeri Europa’s plant in Porto Torres, Italy, has also been kept offline. There are no plans to bring either facility back on stream.

Strong demand for polyamide feedstocks, caprolactam and adipic acid are also expected to remain strong in 2011, with double-digit growth expected in Asia, particularly for polyamide 6.

Owing to insufficient production in the key Chinese market and higher prices across the region, European caprolactam producers with flaking facilities will continue to export to Asia because the differential over benzene is far greater than in Europe.

“European buyers must start to realise that they are now in direct competition with Asian buyers who want most long-term fixed contracts in order to guarantee volumes,” a global producer of caprolactam said.

A caprolactam buyer said: “Caprolactam producers are looking to Asia, deducting volumes from Europe, which can create a shortage for some middle-sized customers.”

A similar scenario is expected for adipic acid, which in recent months has been exported from Europe to Asia because of record high prices in Asia.

The adipic acid market is also expected to continue to feel structural pressure after the closures of Invista’s 270,000 tonne/year facility at Wilton in the UK, and sites in the US and Canada, resulting in around 20% of global production being taken out of the market.

Invista’s closure in the UK resulted in a loss of 25% of total European adipic acid production.

A surprise turnaround for the phenol market has been the strong resurgence of demand for phenolic resins in 2010, a trend which looks set to continue into 2011.

“Demand is still very healthy and the insulation sector is going very well. Our forecast is very strong for next year. We are pushing volumes and are being very optimistic,” said a major phenolic resin producer.

As with other buyers of phenol, the phenolic resin producer was concerned about phenol availability in Europe in 2011.

“I have spoken to the major producers, but there is some uncertainty of product availability from smaller producers,” the source added.

Helena Strathearn contributed to this article

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

By: Julia Meehan
+44 20 8652 3214

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