Europe phenol players disappointed with Aug benzene contract rise

01 August 2014 14:20 Source:ICIS News

LONDON (ICIS)--European phenol producers and consumers reacted with disappointment to the news of a higher benzene settlement which had led to a high phenol contract price, sources said on Friday.

The higher benzene price means a corresponding increase in the phenol contract, which is linked to the benzene price with a fee, or adder, on top. This adder is negotiated, usually quarterly or annually.

The higher price has a negative impact on buyers where margins are further squeezed.

“It’s not good news for us. It’s getting to be a serious problem for everyone. We are working on a very, very low margin. It’s getting not profitable... We are working, working and not earning money,” said one buyer for the phenolic resins market.

“Volumes are good. Margins are very, very bad,” said a buyer for the bisphenol A (BPA) market.

The industry also see some demand destruction due to the higher prices.

“I would see demand for phenol will go down due to this,” said a buyer for the nylon chain.

However, others are less convinced that the small increase will make a difference at these high levels.

“€6 - I don’t think this is the deal breaker any more. Benzene is expensive in the US and Asia,” said a producer.

The increase leads buyers to again question the use of the benzene price in the phenol contract.

“This is a lot about psychology. It’s not about the six euros but most people expected a reduction. It didn’t come. People are asking questions again,” said the second buyer.

By Rhian O'Connor