04 January 2013 23:59 [Source: ICIS news]
LONDON (ICIS)--The European January phenol contract has risen by €69/tonne ($90/tonne) in line with the increase in the benzene contract, producers and consumers said on Friday.
The contract settled on a pre-discounted basis at €1,717-1,757/tonne FD (free delivered) NWE (northwest ?xml:namespace>
There were concerns as to whether downstream markets would be able to absorb the increase, given that phenol operating rates are reduced to 70-80% due to poor derivative demand.
"This is a big problem," a producer in the caprolactam sector said. "We will have to see whether or not we can maintain production at this level. It doesn’t make sense to make a loss."
A resins seller said that it would have ‘huge trouble’ passing on the increase to downstream markets, which would mean a reduction in margins.
"Everybody is worried," he said. Resins markets had been performing well at the end of last year, but it was considered too early to assess January demand.
Bisphenol A sources said that the biggest issue now is the high cost of feedstocks. The price of benzene has nearly doubled from €660/tonne in November 2011 to €1,153/tonne in January 2013, while during the same time the price of BPA went from €1,480-1,570/tonne in November 2011 to €1,570-1,600/tonne in December 2012.
There were concerns that this quarter could see further hikes in the benzene price.
The January benzene contract settled up €69/tonne at €1,153/tonne. The phenol contract in Europe is largely linked to feedstock benzene price movements, although a quarterly or annual fee, also known as the adder, is also an influencing factor for some producers and consumers in
Discussions regarding the quarterly and annual adder are still underway.
($1 = €0.77)
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