OUTLOOK ’18: China phenol/acetone prices to stay high on strong demand

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SINGAPORE (ICIS)–China’s phenol and acetone prices in the domestic market are expected to stay high in 2018 on the back of strong demand from some the downstream industries, offsetting a planned increase in supply.

Phenol prices in the domestic market largely rebounded in the last quarter of 2017, along with commissioning of the first phenol-based cyclohexanone unit in China.

Acetone prices also move up on the back of strong downstream demand.

This, together with planned start-ups of some new downstream plants and the anti-dumping duties imposed on some imported derivatives, makes markets participants optimistic about the 2018 outlook.

Domestic suppliers are expanding production capacities to meet growing demand while running their plants at higher operating rate.

Given no changes in the attractive profits, domestic suppliers are likely to remain at high rates in the near term.

CNOOC and Shell Petrochemical Company (CSPC) plans to commission its 350,000 tonne/year phenol/acetone unit in the first quarter of 2018, and this will increase domestic supply.

According to statistics by ICIS, the unit will produce 18,000 tonnes of phenol and 10,000 tonnes of acetone per month, given normal operation.

Shell Chemical is planning to idle its newer 227,000 tonne/year phenol unit in Deer Park, the US, in the near future while the older, larger plant will be kept running, sources said.

While impact on local phenol supply will be limited, the shutdown will severely affect US’ phenol exports.

Meanwhile, the shutdown will reduce local acetone supply and in turn increase imports due to under production of acetone in the US as a co-product of phenol.

Taiwan-based China Petrochemical Development Corporation (CPDC) will start its 150,000 tonne/year phenol-feed cyclohexanone unit at Nantong in Jiangsu Province, east China in the first quarter of 2018.

This will consume around 12,500 tonnes of phenol per month given normal operation of the unit.

Currently, Fujian Shenyuan New Materials has a phenol demand of 15,000-16,000 tonnes per month to run its 200,000 tonne/year cyclohexanone unit.

The two units totally need 27,000-28,000 tonnes of phenol every month.

For bisphenol A (BPA), another derivative of phenol, the Ministry of Commerce of China ruled that cargoes originating from Thailand constituted dumping, according to the news release at its official website on 9 November 2017.

This, together with short supply, pushes up BPA prices in the domestic market and in turn encourage domestic suppliers to hike their operating rates.

According to ICIS, the overall run rate has risen to around 85% at present, and most participants expect the situation to continue in 2018, which may increase demand for feedstock phenol and acetone.

Based on data from the China Customs, China’s monthly phenol imports average at 30,000 tonnes in 2017 with 26% from the US.

However, volumes from the US will be replenished from Asia or domestic suppliers along with the shutdown of US Shell’s unit in 2018.

Meanwhile acetone demand continues to increase on the back of substantial profits in downstream BPA, methl methacrylate (MMA) and methyl isobutyl ketone (MIBK) industries, but the level is not as strong as phenol.

The Ministry of Commerce of China ruled in November 2017 that BPA and MIBK originating from some countries constituted dumping.

This will lead to high anti-dumping duties and in turn prevent many import cargoes from flowing into the domestic market. Supply will tighten as a result, pushing up prices.

Thereby, domestic BPA and MIBK producers may raise their run rates propelled by generous profits, increasing demand for acetone.

Shandong Haili Chemical Industry’s 130,000 tonne/year acrylonitrile (ACN) unit will come on stream in early 2018, and the unit is heard equipped with a 50,000 tonne/year MMA unit.

Before completion of the MMA unit, the producer plans to purchase acetone to produce acetone cyanohydrin, and the cargoes will be provided to MMA producers, with a purpose to get profits in MMA businesses and consume co-product hydrocyanic acid from its ACN unit.

This will also increase demand for acetone.

The China acetone market has been subject to supply shortage for a long time.

Data show that imports accounted for 45% of total supply in the domestic market in 2016, indicating China’s strong demand for acetone imports.

However, the demand for imports may gradually decrease in the future along with start-ups of new units and rising run rates of existing units in China.

Besides, there is an expectation that acetone supply in the US may tighten after the announcement that US-based Shell Chemical will idle its older line in the US in mid-January 2018, needing volumes from other countries.

China-based suppliers may take the opportunity, actively exporting cargoes to balance domestic supply and demand.

Outlook article by Yoyo Liu