Europe phenol annual fee over benzene agreed up by €50/tonne

07 January 2011 23:59  [Source: ICIS news]

LONDON (ICIS)--The annual fee for European phenol that is negotiated over the benzene contract price has been agreed at an average increase of €50/tonne ($65/tonne), producers and consumers confirmed on Friday.

Discussions relating to the annual fee, also known as an adder, and contract volumes for 2011 began in early October at the annual European Petrochemical Association (EPCA) meeting in Budapest, Hungary.

At that time, phenol producers had discussed price increases of up to €200/tonne, because the market was tight globally, returns on the by-product acetone were poor and predicted growth in phenol derivatives in Asia, particularly for bisphenol A (BPA), were strong.

However, as negotiations continued through the fourth quarter, phenol producers and consumers narrowed their price targets in relation to the fee.

A major producer said: “We have increased the fee everywhere, in some places bigger than others. All our customers – and I mean all our customers – have paid an increase of €35/tonne, and some are close to plus €100/tonne.”

“The basis of the increase was lack of product. The market will be tight until 2013, and there are still some plants shut down.”

The producer also questioned where phenol would come from “if demand remained as it is”.

A second major producer also said that it was successfully passing through an increase on the annual fee for next week. “The fee over benzene is the big issue, and this is what we have been doing. It needs to go up and we have agreed 85-90% of our contracts.”

“There are no new capacities and the market is tight. We have huge problems on acetone, since we can’t sell it at a normal price, and we are having to export large volumes [of acetone] to Asia,” the second major producer said.

“If you look to Asia, [the fee] over benzene, it’s sky high. And we can’t benefit from it because we need to supply our European customers,” the producer added.

Several buyers said that they had been able to secure a fee increase that was slightly below the average plus €50/tonne, but they acknowledged that there were variations.

A major buyer said: “Some producers have been very determined, and for one of our smaller contracts we have paid an increase of €30/tonne. But the bulk has been agreed at a €20/tonne increase, although with one or two [suppliers] the fee has moved up €10/tonne.”

Producers agreed that, in some cases, the fee had been a bit less than €50/tonne but, equally, in others they had achieved a larger increment. Variations depended on the size of the consumer, proximity to coastal storage tanks and what the previous fee had been for individual customers.

A distributor said that originally “there were mixed numbers thrown into the ring”.

“At the end, plus €50 is a reasonable and acceptable level. Phenol is so short [that] people are more concerned with obtaining material than with the price.”

The distributor added, however, that in combination with the €149/tonne hike in the price of benzene in January, the total rise of €199/tonne this month “is a really significant increase, but you can’t get away from the benzene settlement”.

Julia Meehan contributed to this news story.

($1 = €0.77)

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By: Peter Gerrard
+44 208 652 3214

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