Uncertain 2012 phenol outlook stalls Europe annual fee negotiations

09 December 2011 16:39  [Source: ICIS news]

By Julia Meehan

LONDON (ICIS)--Uncertainty over phenol derivative demand in 2012 has resulted in stalemate for some phenol producers and consumers in Europe, market sources said on Friday.

“All my suppliers are calling on a daily basis. I spoke with one who said plus-€20/tonne [plus-$27/tonne] and another said plus-€50/tonne, but I said forget it,” a buyer said. “We are postponing [settling the fee] by as long as possible because we don’t want to pay more than others,” he added.

Since the start of the fourth quarter, demand for phenol and its derivatives has dropped significantly, resulting in producers and consumers running their respective facilities with as little stock as possible.

This in turn has resulted in buyers revising their original targets in relation to the fee.

Back in October, most buyers were reluctantly preparing for a “small” increase, but as concerns over the global economic climate intensified most revised their targets to a rollover, even a reduction in some instances.

The latter intention, however, has been meet with strong resistance from European producers, who all say that customers have ordered the same volume for 2012 as they did in 2011, with some even wanting more.

One producer said: “The prevailing security of supply outweigh price and not one consumer is taking less [phenol] because the global market is fundamentally short.”

The producer said its largest customers would be paying €20/tonne more, while small-to-medium sized customers were faced with a €50/tonne increase on their fee.

A distributor of phenol said negotiations were “progressing” but it did not expect to see the 2012 fee increase by €20/tonne. But he added that European producers were being “very strong” in relation to their price targets.

“People need to find a solution,” the distributor said.

Another buyer said its situation in relation to its phenol price and availability was “mixed”.

“We have a benzene plus fee which can change depending on the integrated margin and whether acetone demand is good or bad,” the buyer said.

In terms of security of volume, he said: “We can never say we are fully secured. Although one of our suppliers is cumene integrated, if they have an industrial problem then it [supply] can get very tricky for us.”

Another buyer said a flexible phenol contract price related to acetone was totally unsuitable since it had “no control over acetone”.

The fee over the benzene contract price is rarely disclosed by producers or consumers. However, €250–330/tonne over the benzene contract price is an average figure used by the industry for medium-sized customers.

The fee settlement is typically applied to the first published phenol ICIS report of the year.

($1 = €0.75)

For more on phenol visit ICIS chemical intelligence 
Please visit the complete ICIS plants and projects database


By: Julia Meehan
+44 20 8652 3214



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