OUTLOOK '14: Phenol market not expecting strong start to year

31 December 2013 10:00 Source:ICIS News

By Julia Meehan

LONDON (ICIS)--The outlook for the phenol market in 2014 is uncertain, particularly for major derivative bisphenol A (BPA) which drives global demand.

Industry participants are not expecting a strong start to the year and the outlook for 2014 verses 2013 is a touch bearish, at least for the first half of the year. This is largely due to the high cost of feedstocks, energy and transportation.

The main issue dominating the direction of the European phenol market is additional capacities coming on stream in Asia for phenol and BPA, as well as polycarbonates (PC).

A common feature in other phenol derivatives markets, such as nylon intermediates and phenolic resins, is the lack of export opportunities because Europe is expected to remain an expensive region for feedstocks and for phenol.

In addition, the ongoing threat of cheap imports of BPA and nylon continue to dampen the mood of the market going forward.

Another interesting feature for 2014 is that European producers are looking to the distribution market as an outlet for phenol.

“What has already changed is that phenol producers are talking to distributors - now they try to use the distributors to sell the phenol - in the past it was always easy for European producers to sell phenol,” said a distributor.

Although there are concerns and much uncertainty surrounding the phenol market in 2014, most buyers say they will be taking the same volumes as they did in 2013.

However, a few stress that they are looking at alternative sources of supply outside the European arena.

“In phenol we will be buying the same, but we are small,” said a phenol buyer for more specialised downstream applications.

“Even if we increase [our demand] 10% it will not make any difference. Acetone is looking pretty good - the same as 2013. The big question mark will be if the price goes up too far - what will be the impact?” the buyer added.

In the phenolic resins sector, a producer spoke of a similar situation to that of 2013.

“2014 - the situation will be similar. Some customers are positively looking at it - as an average - it will be similar growth - average 1-2% on average depending on market.”

Another buyer consuming phenol for the nylon intermediates market did not expect to see a “big difference” in its phenol consumption, but it did say that the terms and conditions of its 2014 contracts needed “more flexibility”.

“In terms of phenol consumption - we don't see big differences. We need much more flexibility - who can be flexible will be the winner.”

Another important aspect for the phenol buyer was the prospect of securing phenol outside Europe.

“You can get it from the east or west - price-wise we find it an interesting situation,” the buyer added.

Increasingly during 2013, some of the major phenol buyers spoke about competitively priced imports from outside Europe. But producers were largely unfazed by this since few customers are able to facilitate imports, notwithstanding the fact that phenol is a difficult chemical to transport.

The mood of the BPA market remains downbeat following a difficult 2013.

Major buyers of phenol for the production of PC and epoxy resins hope that 2014 will be a better year for margins and demand, but there is little to suggest that these markets will improve in Europe any time soon.

Sharing its thoughts about the state of the phenol market, a major buyer for the BPA market said: “I know it's tough for the phenol producers because of course the market is down - but at the same time - with energy as it is and plants not running at 100% - it's a depressing situation.”

By Julia Meehan