Price and market trends: Three factors hanging over Europe phenol and acetone

18 October 2013 09:49 Source:ICIS Chemical Business

Acetone supply is short because of cuts in phenol production due to the downturn in demand for BPA and PC

European phenol and acetone markets are under pressure that is likely to continue next year, sources said on the sidelines of the 47th annual European Petrochemical Association (EPCA) meeting on 6 October.

“Acetone is short, phenol is running at reduced rates and we will soon see all these new capacities coming on stream in Asia,” a major consumer of both materials said.

A second large buyer said: “I agree on all three points. I sense there is a lot of pressure to move phenol, acetone is tight and we are all still looking to see how new capacities in Asia will impact on Europe.

“I think we are starting to see the effect of Asia now. Next year will be interesting.”.

PHENOL PRODUCTION CUTS
Acetone supply is short because of ongoing cuts in phenol production, not only in Europe, but on a global scale because of the downturn in demand for bisphenol A (BPA) into polycarbonates (PC) and epoxy resins.

One source following the phenol and acetone markets in Europe said it had heard that operating rates in Europe were as low as 60%.

Others estimate put them to be around 70%.

“We will experience the full increase of the Asian capacities next year.

“Exports to China will eventually stop and this will be reflected for the whole of Europe. All the capacities are limiting export opportunities,” a major buyer consuming for the nylon intermediate market said.

The buyer added that caprolactam exports so far this year was 45-50% lower than in previous years.

While most discussions focused on tight acetone, long phenol and the ever-expanding Asian markets, there was much speculation surrounding market consolidation in Europe.

“I am always being asked about our production,” said a major producer.

It also said that the market really needs to look to buyers first in relation to any future consolidation in the market.

IMPROVED DEMAND
While the feeling in the market was less than upbeat, some areas of the phenol sector have shown better performance this year.

Phenol resins have done better than most markets in terms of demand.

However, sources in this sector too talk about poor margins and the need for phenol prices to come down.

“Resins is the more healthy application. Quarter one was a little difficult, but by April consumption was at a very high rate, but margins are a different story,” a phenolic producer said.

Despite concerns about high feedstock costs, lack of exports, market length, market tightness, lack of export opportunities and threat of imports, sources did not think that 2013 has been that bad for business.

“This year’s not been great but it’s been acceptable. I think next year will be very much the same,” commented one buyer.

Another buyer said it could have been worse.

“Well, we’re still all here, so it can’t be that bad,” added a 
third buyer.

By Julia Meehan