EPCA ’11: Producers aim to increase Europe 2012 phenol fee

02 October 2011 10:11  [Source: ICIS news]

BERLIN (ICIS)--The annual phenol fee, also known as the adder, over benzene, will be a key discussion point among the European phenol community during this year’s 45th annual European Petrochemical Association (EPCA) meeting, market sources said on Sunday.

The main question for producers and consumers is what volumes will be taken next year, which will then lay down the foundations for the fee negotiation.

However, even without being fully committed to its volumes for 2012, one major buyer said its suppliers were already talking about a €30/tonne ($45/tonne) increase.

“They [our suppliers] are targeting an increase of €30/tonne, but I expect it to rollover,” the buyer said.

He added that other than producers wanting to increase their margins, there was little to support an increase in the fee, particularly with the economic outlook so uncertain.

It was proving very difficult to forecast beyond the first quarter of 2012, the buyer said.

“I don’t expect the first quarter to be strong, but maybe things might start to pick-up in the second quarter. We will have to wait and see,” the buyer added.

It was a very strong start to the year for downstream phenol derivatives, bisphenol A (BPA), phenolic resins, caprolactam and adipic acid, but as the third quarter progressed and economic concerns spread across global economies, the mood of these downstream market turned from being "cautiously optimistic" to simply "cautious".

Another European buyer of phenol for the production of phenolic resins into the construction industry said it was clear on what volumes it would be taking in 2012, but an increase in the annual fee will be very difficult to implement downstream.

“We are increasing our volume next year, but to pass this onto resin customers is very difficult. We want to stick with an annual fee, rather than a quarterly negotiation, because resin buyers need to have a fixed price for six months to a year,” the buyer said.

The buyer said phenol suppliers were intending to increase its fee by €30-50/tonne, but it was being “punished” on volume.

There has been a push this year by global majors INEOS Phenol and CEPSA Quimica to shift annual fees negotiations from an annual to quarterly discussion, but there has been reluctance on the part of some market participants due to time constraints and reliability of supply and price.

“I would need to employ an extra person to negotiate the fee if I moved all of my phenol contracts to a quarterly basis and my customers need price stability,” said a buying source.

The fee over the benzene contract is never disclosed by producers or consumers. However, €270/tonne over the benzene contract price is an average figure used by the industry.

The fee settlement will be applied to the first published phenol ICIS report of 2012.

This year’s EPCA meeting runs from 1-4 October.

($1 = €0.75)

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By: Julia Meehan
+44 20 8652 3214

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