Europe phenol market under pressure from lower Asian prices

21 June 2013 17:22  [Source: ICIS news]

LONDON (ICIS)--The European phenol market is under pressure from lower-priced Asian phenol and phenol derivatives, major buyers said on Friday.

A large phenol buyer, consuming for the production of phenolic resins, said that while demand improved in June, it was some 25% below March, April and May of 2011.

“In 2011 we sold a lot [of phenolic resins] to Asia, but at the moment it’s difficult and the margins are very low,” the buyer said. “June looks better, but it’s still really tough today – and Asia is the main issue. I hope that benzene drops massively in Europe."

Asian spot phenol prices are currently hovering at similar levels to the European benzene contract price, which settled at €1,045/tonne ($1,375/tonne) FOB (free on board) NWE (northwest Europe).

A second buyer for the nylon intermediates sector said that while business is poor, it was able to balance its position in the market since it is a global player.

However, it too stressed that there is “tremendous” pressure in the market, much of which was stemming from Asia and the high price of phenol in Europe.

“People will go elsewhere and prices will drop dramatically – this is not good for the whole value chain,” the large buyer said.

While buyers appreciate that phenol producers are also under pressure in terms of high raw material costs and low margins, they all hope to see some price relief moving into the third quarter.

“Phenol is getting longer than in the first part of the year, and if we can get some [price] relief, even if its temporary, this might get things moving again,” commented another buyer.

Producers are not holding out much hope of a recovery in the downstream bisphenol A (BPA) market, which ultimately drives phenol demand.

“In the BPA market, nothing has changed. Phenol and acetone demand has not changed – it's the same as the last weeks and months, people are struggling and people are complaining,” said a major producer. “Players are suffering from competition from Asia - we don't see this changing this year or next.”

Lower prices for Asian imports is the main talking point in the European BPA market.

Several sources, including a producer, said they had heard of spot offers as low as €1,400/tonne FD NWE for Asian imports. The majority of the material is from Korea and sold duty-free in Europe. 

A trader said: “Customers are now taking Asian material as they have had the grades approved for their applications.” 

One BPA source said that despite the low Asian prices offered, buyers were not purchasing large volumes since they want to keep inventories as low as possible. 

($1 = €0.76)

By: Julia Meehan
+44 20 8652 3214

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