FocusAsia phenol set to rise on cost pressure, tight availability

28 February 2012 06:52  [Source: ICIS news]

By Liu Xin

SINGAPORE (ICIS)--Asian phenol prices are poised for further gains because of mounting cost pressure and tightened availability, market sources said on Tuesday.

Spot phenol prices rose by $25-40/tonne (€18-30/tonne) week-on-week to $1,525-1,560/tonne CFR (cost and freight) China on 24 February, according to ICIS, driven mainly by high production costs.

Operating rates at regional phenol facilities had been trimmed to 60-80% since the third quarter of last year until late January this year because of poor economics.

The spread between phenol and feedstock benzene narrowed to $100-200/tonne in November and December 2011, which is considered unhealthy by industry players as a break-even level should be at least $300/tonne.

Asian phenol prices witnessed a brisk rebound in the second half of December 2011 and have remained on a steady uptrend, gaining 37%, or $400/tonne, from mid December 2011 levels, triggered by tight supply following production cuts at regional phenol facilities.

Most regional phenol facilities have resumed full operation since early February following an ease on cost pressure.

However, supply is tightening because of a shortage in deep-sea cargoes, which account for over 30% of monthly phenol imports into China.

The arbitrage window to move cargoes from the US and Europe to Asia is closing given the sharp rise in feedstock costs, traders said.

“Phenol prices are likely to remain firm in March and April,” a regional trader said.

Spot benzene prices were at $1,190-1,200/tonne FOB Korea on 28 February, while propylene prices were firm at $1,380-1,400/tonne CFR NE Asia, rending support to further increases in phenol prices.

Meanwhile, it remains uncertain if there will be further delays in the start-up at Kingboard’s 320,000 tonne/year phenol/acetone plant in eastern China, market sources said.

The facility was initially scheduled to come on stream in March, but test runs have been delayed because of the sharp rise in feedstock benzene and propylene costs.

Phenol buyers in the key China market are keen to fill up their stocks, but soft Chinese domestic prices and a widening gap in buying and selling ideas kept trades for fresh shipments subdued.

“We have been looking for fresh [phenol] cargoes, but offers are limited,” a Chinese trader said, who added that regional producers generally prefer to delay negotiations amid an upbeat price outlook.

($1 = €0.75)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Liu Xin
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