Phenol market describes benzene price developments as a 'disaster'

29 November 2013 13:35 Source:ICIS News

LONDON (ICIS)--The potential for a three-digit increase in the value of feedstock benzene in December will be a disaster for the phenol market, sources said on Friday.

“An increase in December on benzene will kill the market. Maybe it’s not so bad for the [phenol] producers but [for] downstream derivatives this is a disaster,” said a major buyer of phenol.

Another large buyer for the fibre intermediates sector - for which phenol is a feedstock - said: “The benzene development is a disaster. It’s the last bid to kill a market that is already in bad shape.” 

The phenol buyer said an increase in the benzene contract price in December would simply mean that customers will postpone orders.

“We need to consider it’s the end of the month and there is a lack of demand," it said 

“People are afraid and people prefer to postpone [orders] to January. The polyamide (nylon) business is going down sharply, and it will be a difficult December because there will be more [pressure] than expected on demand and cost. Our polyamide customers are asking for rollovers [for December],” the buyer concluded.

A second phenol buyer in the nylon market said: “If benzene is going up above $1,300/tonne (€962/tonne) this will kill demand.”

Benzene is a major feedstock for the production of phenol.

Benzene spot prices have firmed during November, which will result in a higher contract price than in November, when the contract settled at €848/tonne FOB (free on board) NWE (northwest Europe).

A producer of phenol described a sharp increase in benzene in December, which is traditionally the slowest month for phenol and phenol derivatives, as “awful”.

A second producer said it would be reducing its phenol production rates further.

Operating rates in Europe are estimated to be around 60-70%.

“Basically, the main topic is developments on the benzene side. Prices have increased rapidly. We are reducing production according to demand – we will run at low rates and run with as low stocks as possible,” the producer said.

Phenol operating rates have been reduced since July 2012 because of a lack of phenol exports to Asia, weak macroeconomic conditions and poor demand for major derivative bisphenol A (BPA).

In recent months, phenol derivative markets have come under additional pressure from competitively priced imports, largely from Asia and particularly for BPA.

($1 = €0.74)

By Julia Meehan