01 February 2013 23:59 [Source: ICIS news]
LONDON (ICIS)--The European phenol contract price for February has decreased by €113/tonne in line with this month's benzene contract settlement, sources confirmed on Friday.
The contract settled on a pre-discounted basis at €1,604-1,644/tonne ($2,168-2,222/tonne) FD (free delivered) NWE (northwest Europe).
The decrease of €113/tonne for major feedstock benzene is a welcome relief for phenol producers and consumers in their respective markets because record high benzene prices have contributed to a drop in demand.
However, there are many sources who believe that benzene needs to come down by a lot more in order to generate demand and encourage phenol producers to increase operating rates.
“It needs to be a heck of a lot more than a €113/tonne drop in feed costs to bring back demand. I think benzene needs to come off by at least another €200/tonne,” said a buyer for the production of phenolic reasons.
Some sources in the market question whether the price of benzene has really had such an impact on phenol demand.
A number of producers believe the current struggle in the market does not stem from benzene, but simply because of macroeconomic conditions having had a significant impact on key derivative polycarbonate (PC).
One medium sized producer said: “The price of benzene does not matter. Even if it [benzene] goes down by another €200/tonne – polycarbonate (PC) demand is still very poor”.
Another phenol producer said it had not received any new enquiries because the price of benzene had come down. However, it did say that “lower prices are better than higher prices".
“It won’t spur demand but it helps margins from getting squeezed. If [feedstock] price goes down you have a better chance of improving margin,” the producer added.
Phenol production rates in Europe are estimated to be around 70-80%.
The phenol contract in Europe is largely linked to feedstock benzene price movements, although a quarterly fee, also known as the adder, is also an influencing factor for some producers and consumers in Europe.($1 = €0.74)
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