Europe phenol demand expected to remain low for rest of year

12 July 2013 13:00 Source:ICIS News

LONDON (ICIS)--European demand for phenol is expected to remain low for the rest of the year and there are no positive signs that it will improve after the peak summer holiday period, sources concurred on Friday.

The mood in the bisphenol A (BPA) market is particularly downbeat and sources consuming phenol for polycarbonates (PC) and epoxy resins do not see the landscape changing in the foreseeable future.

“BPA is not fun and the main reason is because of polycarbonates. It won't become fun because of all the new capacities coming on in Asia. It [the PC market] will become very close to ugly,” said a major phenol buyer.

The buyer described its phenolic resins business as “looking better”.

“Volumes [of phenolic resins] are not as spectacular as they have been and it’s very difficult – almost impossible – to recover feedstock increases. When feedstock prices drop, customers want it straight away,” the buyer added.

A major PC producer said it had seen no signs of an improvement in its demand.

“It’s the same situation. I don’t see signs of improvement. As long as we have the most expensive benzene in the world, we don’t have a chance,” it said.

While the recent drop in the value of feedstock benzene did little to generate any new demand for phenol derivatives on the whole, a producer of phenolic resins said that its demand had improved, but only a little.

“Resins move a little easier when phenol and benzene move, while I think the other phenol derivatives are more rigid,” it said.

In terms of volume, another phenolic resins producer said: “On average, I think the volumes are going down a little bit. I see our customers are maybe faced with less orders – this month could be due to the summer vacation – but last month there were definitely less orders.

“There is a slowdown in the business and many of our customers are being very careful and they don't want to buy big quantities anymore – this product has a shelf-life and it’s also economy related. Even if phenol and raw material prices go down, I think there will be less demand.”

In the nylon intermediates market, adipic acid (ADA) producer Radici lifted force majeure on ADA at its plant in Troglitz in Germany.

The company lifted the force majeure at its 80,000 tonne/year ADA plant on 4 July. The declaration had been made on 14 June following the collapse of a bridge close to Radici Group’s plant.

Following the force majeure announcement Radici reduced its phenol demand to 50%.

“We are more or less back to normal on phenol. It was not so simple to arrange everything – we were able to keep the flow – and now it seems that everything is coming back to normal,” a company source confirmed.

In the caprolactam (capro) market, a major phenol buyer said the market situation was unchanged.

“The caprolactam market has not changed. What I see is capro is still under water.

“It’s not an optimistic story. There is lots of pressure and phenol is just as depressed,” the buyer said.  

On the selling side, phenol producers confirm that the market situation has remained the same for months now and little change is expected in the coming months.

“Things might come back a bit in September, but then customers will start talking about year-end and, before we know it, it  will be 2014.

“This year has not been as bad as we thought, but it could have been better,” commented a European phenol producer.

Describing the phenol market for 2013, a second producer said: “In the discussions I have had, all it will take is a minor up-tick in consumer confidence because phenol is so consumer driven.

“We planned pessimistically and cautiously so we're not surprised. So what does this mean for prices as we go forward? It’s a global market – benzene and benzene derivatives are truly global. It’s a global market which makes very interesting analysis.”

According to ICIS data, BPA accounts for 52% of global phenol capacity, with phenolic resins at 38%, capro at 8% and ADA at 2%.

For BPA, 57% of global capacity is for the PC market, while the remaining 43% is for epoxy resins.

By Julia Meehan