Demand levels differ across Europe phenol derivative market

07 February 2013 16:52  [Source: ICIS news]

LONDON (ICIS)--European demand for phenol derivatives is mixed, with signs of improvement for some, while others see no indication of business picking up any time soon, sources said on Thursday.

A major consumer of phenol for the production of key derivative polycarbonate (PC) said business was improving, but very slowly.

“We are now a little bit more optimistic, but still we don't see much light at the end of the tunnel long term. Plants are running well for the time being, but we still have questions about the second half of the year”.

While the buyer said it had no problems securing all the phenol it needed, it did have problems getting its acetone.

In contrast, a second major PC producer said its demand had not improved, but rather the opposite.

“For Europe it's the same situation. I don't see things picking up, rather the other way around,” the buyer said.

Another large buyer of phenol, this time for the nylon intermediate market, said: “Finally our demand is a little bit better. But you need to take into consideration that we have come from a very bad fourth quarter. January was flat so every single improvement is like oxygen.”

The buyer said its main concern was to remain competitive in downstream nylon 6 and 6,6 markets, stressing that raw material costs remained high.

“Sooner or later people will have to come back to make shoes. People need to consume goods and the chain will have to move again.”

“A drop of €113/tonne is €113/tonne less for us on feedstock,” it said.

The February benzene contract price moving down by €113/tonne will give some relief, phenol buyers added.

Another buyer consuming material for the nylon intermediate market said its demand was not that bad, although margins were non-existent.

“Price wise and looking from a historical perspective, the big problem is the very high benzene price. Industries for caprolactam are running at reduced rates and margins do not exist,” the buyer said.

In the phenolic resins market, which is the second largest derivative for phenol in Europe, demand has also improved compared with previous months, but with business so heavily linked to the performance of the construction and automotive industries, sources were not sounding particularly upbeat about the current global economic climate.

Regarding its demand, a major phenolic resin producer said: “It’s not got any worse, but December was terrible because of destocking activities and automotive was really terrible. January was not very good, but it was acceptable.”

In relation to demand, a major phenol producer agreed that demand was mixed in Europe and not exclusive to a particular derivative.

“In general we're seeing a very strange pattern. Some [customers] are saying its picking up or just the same and others are saying they are trying to get margins up,” the producer source said.

“What we are seeing is a gradual improvement, but it’s a mixed bag,” the producer added.

Phenol operating rates in Europe are estimated to be running at 70-80% of capacity. Rates have been turned down since July 2012 because of poor macroeconomic conditions and lack of export demand to Asia.

($1 = €0.74)

By: Julia Meehan
+44 20 8652 3214

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