Europe phenol market expresses fears over posssible benzene rise

22 November 2013 17:47 Source:ICIS News

LONDON (ICIS)--The European phenol market is concerned over the recent hike in feedstock benzene spot prices, sources said on Friday.

Benzene spot prices are currently valued at $1,320-1,350/tonne ( CIF (cost insurance freight) ARA (Amsterdam-Rotterdam-Antwerp). This converts into an average of €988/tonne.

The November benzene contract price settled at €848/tonne FOB (free on board) NWE (northwest Europe).

The potential for a phenol contract price increase of €140/tonne was described by some in the bisphenol A (BPA) community as cataclysmic and would kill the market.

“In terms of [BPA] demand - its weak. An increase [of this magnitude] in benzene will kill the BPA market - it is already so weak,” said a BPA buyer.

A phenol producer also used the word “kill” to describe the impact of such an increase in feedstock costs in December, particularly since it is traditionally the slowest month for phenol demand.

The benzene contract price settles on the final working day of the month and is largely based around spot price developments and trades leading up to the settlement day.

The December contract price settlement is expected on Friday 29 November.

In the phenolic resins sector, a producer feared an increase in feedstocks in December would defer any buying activity until the second half of January.

“An increase in feedstock costs, when demand at its lowest is not healthy - there may be a point when customers delay orders.

“People don’t want to have inventories. A feedstock increase will definitely slow down the market even more. It’s not tactical to increase benzene,” said a European phenolic resins producer.

In relation to the possibility of benzene and phenol prices firming, another phenol buyer said: “I don't know if phenol chain will be able support an increase.”

Demand for phenol and phenol derivatives has been in decline since July 2012 and phenol operating rates have been reduced ever since.

Demand for phenol into major phenol derivative BPA has been low because of poor demand for BPA derivatives such as polycarbonate (PC) and epoxy resins.

The BPA, PC and epoxy resins have all been exposed to the same negative effects of cheap imports from Asia and slowing demand from the construction and automotive sectors. 

Producers of BPA and epoxy resins are quoted as saying that it is now cheaper to buy both materials than to produce them in Europe.

($1 = €0.74)

By Julia Meehan