China phenol firming up on tight supply, robust demand

Source: ICIS News


SINGAPORE (ICIS)--East China phenol spot prices continue to rise since the last four weeks on the back of tightening supply as several turnarounds are taking place.

 - Supply to come under pressure due to turnarounds

 - Upstream benzene prices seen supporting phenol prices

 - Downstream bisphenol A (BPA) market is robust as well

Spot phenol prices in east China closed at CNY9,700-9,800/tonne ex-tank on 6 August, up by CNY200/tonne from the 3 August close of CNY9,500-9,600/tonne ex-tank, according to ICIS data.

Major producer Sinopec increased its domestic offers for phenol in east China on 6 August by yuan (CNY)400/tonne ($59/tonne) to 9,800/tonne, in line with an increase in phenol spot prices in the market, a company source said.

Most cargo-holders were optimistic about the market outlook on the back of an expectation of decreasing supply as some suppliers have started, or planning to start, maintenance at their phenol/acetone units in August.

Harbin Bluestar, Huizhou Zhongxin Chemical and Sinopec Mitsui either have launched or plan to launch maintenance at their phenol/acetone unit in August reducing spot supply to some extent.

In view of the tightening supply downstream producers were focused on consumption of contract cargoes while stocks being offered to traders were either reduced or totally stopped.

As a result, it was difficult for second-tier traders to find availability of phenol in the local market.

Output cuts/suspensions at phenol units
  Producer Affected capacity (‘000 tonnes/year) Note
Northeast China Bluestarl 75 Shut for maintenance during 20 July-late August
South China Huizhou Zhongxin 18.25 shut on 3 August for one month of maintenance
East China Shanghai Sinopec Mitsui Chemicals 250 Shut for maintenance from late August to early September
East China Changsu Changchun China 300 Shut for one month of maintenance in late September
North China Sinopec Sabic Tianjin 220 Shut for 20 days  of maintenance in September
Source: ICIS

Upstream benzene prices in east China have remained strong.

At the close of trade on 6 August, benzene prices were assessed at yuan (CNY) 7,000-7,030/tonne ex-tank in east China, up by CNY30-100/tonne from 3 August, according to ICIS data.

Market participants believe that benzene demand will likely pick up further, on the back of high operating rates of downstream SM plants giving support to benzene prices.

This would mean higher costs for phenol makers, which would support higher values of the material.

In addition, supply will be tightened as inventories at east China ports have registered a drop for three consecutive weeks because of reduced imports following sharp depreciation in Chinese yuan.

Thus, domestic benzene prices will stay in an uptrend.

Domestic phenol prices also gain upward momentum from a robust downstream bisphenol A (BPA) market, where prices have been driven by the expected start-up of further downstream polycarbonate (PC) units in Shandong around August.

Focus article by Yoyo Liu