July phenol contract price expected to fall 6% on lower benzene

19 July 2011 18:10  [Source: ICIS news]

HOUSTON (ICIS)--US formula-based July phenol contract prices are expected to fall by 6% from June because of a corresponding drop in July benzene, sources said on Tuesday.

US phenol contracts that are based strictly on the monthly change in benzene values are expected to fall by 5.02 cents/lb ($111/tonne, €79/tonne).

However, buyers said that freely negotiated July phenol contracts will not decline as much because of tight supply and stable demand.

Few nominations have been heard for July freely negotiated phenol contracts, but early estimates are for a decrease between 3–5 cents/lb.

A buyer said supply is tighter in the northeast and midwest regions because production is slowing down, but added supply in the US Gulf should stay strong as producers are running at high rates to build up inventories ahead of hurricane season.

Producers said domestic demand for phenol remains strong, except from the phenolic resins market, lending strength to freely negotiated contracts settling at a premium to formula-based contracts.

Several buyers argued that the drop in demand from phenolic resins is pushing overall demand lower.

In addition, spot prices for parcels into Asia have dropped significantly, lowering the margins on that material, also cutting into demand.

As a result, US buyers said the premium on freely negotiated contract prices over formula-based contracts should start to shrink, unless prices on material into Asia pick up.

Major US phenol producers are Dow Chemical, Georgia Gulf, INEOS Phenol, SABIC Innovative Plastics and Shell Chemical.

($1 = €0.71)

To learn more about phenol, visit ICIS chemical intelligence

By: John Dietrich

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