FocusAsian phenol prices hit fresh highs amid tight supply

22 April 2011 06:39  [Source: ICIS news]

By Liu Xin

SINGAPORE (ICIS)--Asian phenol spot prices hovered at historical highs amid a prevailing supply crunch despite the lacklustre market conditions in key China markets, sources said on Friday.

The tight regional supply following recent and upcoming shutdowns at northeast Asian facilities was intensified by a lack of deep-sea cargoes amid a severe feedstock cumene shortage.

“The prevailing tight supply is likely to persist into June,” a northeast Asian trader said.

Japan’s Mitsubishi Chemical plans to restart its phenol/acetone plant in Kashima at the end of June. The plant, which has a capacity of 250,000 tonnes/year of phenol and 150,000 tonnes/year of acetone, was shut down following the devastating earthquake and tsunami on 11 March.

Japan has made an unusual spot purchase of more than 15,000 tonnes of phenol for delivery in April and May amid production turmoil in the aftermath of the disaster, sources said. Japan is a net exporter and does not usually buy on the spot market.

In the week ended 15 April, phenol prices were assessed at $2,000-2,045/tonne (€1,380-1,411/tonne) CFR (cost & freight) China, up over 10% from $1,810-1,840/tonne CFR China on 11 March, according to ICIS data. (refer to graph below)

Despite the hike, cargoes bound for the key China markets were traded at the lowest prices in Asia, suppressed by persistently low Chinese domestic values and sufficient inventories.

Spot prices in southeast (SE) Asia and India had surged more than 15% over the same period to $2,030-2,200/tonne CFR SE Asia/India on 15 April, ICIS data showed.

Derivative demand in China was shortened by the government’s credit tightening measures to curb inflation. Downstream phenolic resins producers were heard to have slashed operating rates at their plants amid cash flow constraints and poor demand.

“Weak business conditions in the downstream sectors are exerting downward pressure on domestic phenol prices, despite escalating import costs,” an eastern China-based importer said.

The prevailing Chinese domestic values have placed the import parity of phenol at below $1,900/tonne CFR China. However, buyers are warming up to higher import prices in view of depleting inventory levels and a lack of upcoming import arrivals.

Meanwhile, robust demand from the downstream plywood sector in southeast Asia, coupled with a growing demand from India and spiralling Indian domestic values, are helping to fuel prices further.

In southeast Asia, end-users in the downstream plywood glue sector have more than doubled their production in view of the strong demand from Japan to help in the country’s reconstruction efforts, sources said.

“Spot phenol prices will hit new highs in the second quarter thanks to the persistent tight supply,” a key regional trader said.

The primary chemical intermediates and derivatives of phenol include phenolic resin, bisphenol-A (BPA), caprolactam (capro), adipic acid (ADA) and plasticiser.

Key regional phenol producers include Mitsubishi Chemical, LG Chem and PTT Phenol.

($1 = €0.69)

For more on phenol, visit ICIS chemical intelligence
Please visit the complete ICIS plants and projects database
Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Liu Xin
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