AFPM '19: US phenol tight into April as production issues resolve

Author: Amanda Hay

2019/03/23

HOUSTON (ICIS)--US phenol markets continue to grapple with tight supply while persistent oversupply of co-product acetone still weighs on production.

Supply levels are just starting to recover heading into this year’s International Petrochemical Conference (IPC), following outages and reduced rates by three separate producers in the first quarter.

Each producer declared force majeure on phenol, which kept supply incredibly tight in North America and left little material for domestic spot or export markets.

“We’ve seen it all — adder increases, force majeures,” a buyer source said of market conditions that have tightened since mid-2018. “Customers were scrambling; no one has product.”

Domestic buyers paying on a spot basis have taken some increases amid the material shortage.

Even as production rates ramp back up, continued acetone oversupply may prevent producers from running at full rates.

“There is some tempering of domestic production to manage the acetone balances,” a source said, who added that producers would run harder if they had a home for the associated acetone.

Aside from phenol tightness, acetone length has also kept producers out of the phenol export markets.

Minimal activity has taken place this year on exports, compared with a strong 2018 in which export adders rose to around 25 cents/lb ($551/tonne) over benzene.

Contract adder levels are also at a “new normal” after rising the past three quarters. Increases depended on size of buyer and whether contracts were up for renewal, but most saw some increase.

ICIS contract adders are 6 cents/lb higher year on year to a level of 14-18 cents/lb DEL (delivered) over benzene.

“Large buyers saw an adder increase, but nowhere near what small-to-medium buyers did,” a buyer source said. “Producers have been successful getting quarterly changes.”

The movement toward quarterly adder changes has gained traction in the US and Europe as producers attempt to respond to real-time market movements in Asia.

Phenol demand is still strong, currently outpacing supply levels.

Softness persists in downstream polycarbonate (PC) markets, but epoxy resins and nylon markets are stable to strong.

February phenol contracts were 40.36-44.36 cents/lb ($890-978/tonne) DEL (delivered).

Spot prices are 44-48 cents/lb FOB (free on board). Workable spot export adder levels were pegged in the high teens to low 20s cents/lb over benzene.

Major US phenol producers are INEOS Phenol, Altivia, AdvanSix, Shell Chemicals, SABIC and Olin.

Hosted by the American Fuel & Petrochemical Manufacturers (AFPM), the IPC takes place on 24-26 March in San Antonio, Texas.

Focus article by Amanda Hay