22 July 2011 17:58 [Source: ICIS news]
HOUSTON (ICIS)--Several US phenol producers said on Friday they are feeling vindicated for keeping their operating rates high despite falling Asian prices, as prices are starting to rebound in that region.
When Asian phenol prices started to fall in mid-May from record highs, market players expected the arbitrage window for US exports would narrow or disappear, pushing operating rates lower. Sources declined to say the operating rate of their plants.
“We did not slow down our production just because prices in China started to fall,” a producer said. “We had several commitments in place before the fall of Chinese prices.”
The phenol export market into Asia had been presenting US sellers with strong margins, as prices reached record highs of $2,065/tonne (€1,446/tonne) CFR (cost & freight) China main port two months ago, as assessed by ICIS.
Prices dropped to as low as $1,590/tonne CFR in mid-July. However, market players said US phenol production did not slow, and material was available on the US spot market.
“Not everyone is convinced that this fall in Asian prices is permanent,” a producer said on Thursday.
The decision to keep operating rates strong was bolstered by strong domestic demand and the need to build inventories after supply tightness in the first quarter and the impending hurricane season on the US Gulf.
On Friday, Asian spot phenol prices were assessed higher for the second consecutive week, at $1.680/tonne CFR, on improved demand from China and a slightly more upbeat market sentiment.
Adding to the strength of the global phenol market is expected tightness in Europe because of plant issues from Dow Chemical and a force majeure declaration from INEOS Phenol.
If the US operations of Dow and INEOS are forced to cover for the European market, spot supply of US material into Asia will get tight, which could push prices higher and keep open the arbitrage window.
Major US phenol producers are Dow, Georgia Gulf, INEOS, SABIC Innovative Plastics and Shell Chemical.
($1 = €0.70)
To learn more about phenol visit ICIS chemical intelligenceTo learn more about Dow, INEOS, SABIC Innovative Plastics and Shell Chemical, visit ICIS company intelligence
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