OUTLOOK ’17: US phenol margins likely steady

By John Dietrich

HOUSTON (ICIS)–With Asian production levels strong and US domestic demand steady, sources expect that phenol margins for 2017 producers will stay close to steady.

Discussions for adders over benzene costs have been firmly in the 8-12 cent/lb ($176-265/tonne), which buyers have described as a rollover and producers have described as a slight increase.

Sources said the US supply/demand situation will likely remain balanced in 2017, with the ability to lengthen given production rates below desired levels.

Those production rates are not expected to increase unless demand for phenol in Asia grows significantly, opening the door for US exports.

A more likely outcome is for increased or steady-but-high levels of imports of phenol derivatives to move into the US.

This could continue to keep pressure on US phenol buyers in the epoxy resin and polycarbonate (PC) sectors, cutting into US phenol consumption.

Additionally, US supply should be slightly higher in 2017 as producer Altivia runs both lines at its Haverhill plant in Ohio.

Sources said the company started up the second and larger line late in the fourth quarter of 2016.

While the company has said it is considering the start-up of the bisphenol A (BPA) unit at the site, thin margins and soft demand could keep it down for most of 2017.

The biggest sector for demand growth in 2017 phenol could be oilfield resins and products, sources said.

However, there is little expectation that global crude oil prices and production will return to pre-downturn levels. Most are expecting slight growth in pricing and production.

Demand growth for phenol exports is expected to be limited, as Asia will maintain a cost advantage via benzene and production levels remain high.

However, given infrastructure difficulties, imports of phenol into the US are expected to remain highly limited in 2017, sources said.

Major US phenol producers include AdvanSix, Altivia, INEOS Phenol, Olin, SABIC and Shell Chemical.