Chinese ADD on phenol may shift trade flows, dampen imports

SINGAPORE (ICIS)–The imposition of anti-dumping duties (ADD) on phenol imports into China may redirect trade flows and dampen overall import volumes, market participants said.

China’s Ministry of Commerce began investigations on 26 March on phenol imports from the US, European Union, South Korea, Japan and Thailand, ICIS reported earlier.

The probe is expected to be completed before 26 March of 2019, but may extend by another six months under extraordinary conditions, the ministry said.

The step was taken in response to requests from representative domestic producers, including PetroChina Jilin Petrochemical, Changshu Changchun, CEPSA Shanghai, Sinopec Mitsui Chemicals, Bluestar Harbin Petrochemical, Yangzhou Shiyou and Huizhou Zhongxin.

Chinese importers feel that if the ADD is imposed, this will prompt them to consider import alternative sources of non-ADD deep-sea supply.

At present, Chinese importers are purchasing deep-sea cargoes from the US, the Middle East, and the EU as they are more competitively- priced compared with Asia-origin shipments.

China imported around 40% of its total phenol imports from the Middle East, the US and EU in 2017 at 145,358 tonnes.

Asian origin cargoes from South Korea, Japan and Thailand accounted for the remaining 50%.

Phenol total import volumes in 2017 have risen 47.2% compared with a year earlier.

However, with the imposition of the ADD, some Chinese importers said they would possibly look towards the Middle East as compared to the US and the EU as a source of deep-sea phenol. The lack of ADD on the Middle East cargoes is likely to make prices competitive.

Imports from the US are expected to fall this year given the idling of Shell’s No 3 phenol/acetone plant in Deer Park, Texas on 28 February. The plant has a capacity of 240,000 tonnes/year of phenol.

In addition, the start-up of Petro Rabigh’s Phase II 250,000 tonne/year phenol unit in the first quarter of this year will also increase supply from the Middle East.

“If Saudi-cargoes are cheaper compared with the US/Europe and Asia-origin cargoes after the inclusion of the ADD, we will most certainly seek to procure from the Middle East instead,” a Chinese buyer said.

Other market participants said they felt the imposition of the ADD will increase reliance on domestic supplies rather than imported sources as this would make domestic cargoes more attractive price-wise instead.

“China’s domestic phenol capacity and downstream requirements are pretty balanced. If the Chinese producers were to operate their phenol plants at optimal rates, end-users would not have to import so much,” a Chinese trader said.

Domestic Chinese phenol capacity is slated to increase this year, with the startup of CNOOC and Shell Petrochemical’s Co (CSPC)’s 220,000 tonnes/year unity in Huizhou, Guangdong in May.

This is likely to be balanced out by increased bisphenol A (BPA) demand which is supported by expanding downstream polycarbonate (PC) capacity in China.

The start-up of Yantai Chemical’s new 70,000 tonnes/year polycarbonate (PC) plant located in Yantai, Shandong province within the year’s end at the earliest is seen as a supportive factor in Chinese phenol demand.

The PC plant’s monthly consumption of BPA is estimated at up to 5,000 tonnes.

Top Image: Polycarbonate sheets: Photo by View Pictures/REX/Shutterstock (5378996a)

Focus article by Yaw Min Jie