US September phenol contract set to drop by 2% on weaker demand

22 September 2011 20:26  [Source: ICIS news]

HOUSTON (ICIS)--The US September phenol contract is expected to settle lower by 2% from August on weaker demand, sources said on Thursday.

The US phenol contract is expected to fall by 1.63 cents/lb ($36/tonne, €26/tonne), matching the fall in the September benzene contract.

Most US phenol contracts are formula-based and track the change in the monthly benzene contract.

With phenol demand weakening, sources said freely negotiated phenol contracts are expected to settle equal to the benzene-based formula contracts.

Phenol demand is softening in most markets, especially for exports. During the first and second quarters, US phenol producers were seeing strong margins on phenol exports into Asia, with US export prices above an average of 75 cents/lb until the start of July.

However, tighter lending policies and economic concerns in Asia have continued to push the price lower. As of 16 September, US phenol export prices are assessed by ICIS at an average of 69.5 cents/lb.

Domestic demand in the US is also softening, especially in the phenolic resin and epoxy resin markets.

Phenolic resins are used in construction, and the US construction industry remains down. Epoxy resins are often used in coatings, and with cooler weather, the coatings industry is experiencing its typical seasonal slowdown.

Buyers said they expect phenol prices to continue falling, pushed by lower benzene values. As of 22 September, spot benzene was trading at $3.353.45/gal, 6676 cents/gal below the current contract price of $4.01/gal.

Demand for exports is also not expected to return until the global economic situation improves, and domestic demand is expected to remain soft for the rest of the year, buyers said.

Despite the softer demand, producers say they are not stuck with excess spot material, and that it remains profitable to run their plants full-out.

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

($1 = €0.73)

For more on phenol visit ICIS chemical intelligence

By: John Dietrich

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