Asia phenol may extend gains on supply constraints, higher BPA

Focus story by Trisha Huang

MELBOURNE (ICIS)–Spot phenol prices in Asia may extend recent gains on the back of a busy plant maintenance season and rising prices in the key derivative bisphenol A (BPA) sector, market sources said on Wednesday.  

Phenol prices into China, the regional benchmark, were assessed to have increased by 2.5% since mid-January to reach an average of $1,435/tonne CFR (cost & freight) China for the week ended 21 February, according to data compiled by ICIS.

Prices rose despite heavy losses in the main feedstock benzene sector, which slumped by close to 5% over the same five-week period to settle at an average of $1,298.50/tonne FOB (free on board) Korea, ICIS data showed.

Key derivative BPA prices settled at an average of $1,654/tonne CFR China for the week ended 21 February, up by 2.7% since mid-January, according to ICIS data.

“A number of maintenance shutdowns will take place in China and across the region, and phenol prices should rise to reflect this,” said an Asian phenol producer.

Taiwan’s Chang Chun Plastics kicked off a busy plant turnaround season and began a scheduled turnaround at its Kaohsiung phenol/acetone plant in mid-February. The plant is expected to stay off line until mid-March.

Producers including Thailand’s PTT Phenol, Taiwan’s Formosa Chemicals & Fibre Corp (FCFC) and Japan’s Mitsui Chemicals are planning to carry out scheduled maintenance at their phenol/acetone plants in March.  

In China, major producers Sinopec Shanghai Gaoqiao and Sinopec Beijing Yanshan will have overlapping shutdowns between February and April.

As a busy plant maintenance season gets under way, curtailed product availability has prompted end-users in Taiwan and southeast Asia to seek spot cargoes to bridge the supply shortfall. Steady demand from India, a net importer that is buying 16,000-18,000 tonnes of material a month, lent further support to market fundamentals.

That has strengthened Asian phenol producers’ market outlook and lifted their offers to $1,550-1,600/tonne CFR China on a zero antidumping duty (ADD) basis, subject to a 5.5% import duty, in the week ended 21 February.

Domestic phenol prices in east China rose to an average of yuan (CNY) 9,850/tonne ex-tank in the week ended 21 February, the first price increase since October 2013, according to data compiled by Chemease, an ICIS service in China.

“Domestic phenol prices may rise by a further CNY300-400/tonne. The overlapping plant shutdowns in China and across the region will definitely tighten supply, and demand can’t be worse than it has been,” said a Chinese phenol importer.

However, domestic prices in China remained low relative to the US dollar-denominated spot offers, which have continued to curb liquidity in spot trade into China.

The east China ex-tank price placed import parity for phenol at $1,285/tonne CFR China (zero ADD basis, subject to import duty) for the week ended 21 February, while the lowest spot offer available was at $1,550/tonne CFR China (zero ADD basis, subject to import duty) in the same week.

In view of the substantial gap between the prices of locally-produced and imported phenol, Chinese importers by and large import material for distribution in the duty-exempt, bonded or re-export sector.

Phenol in the duty-exempt, bonded sector in China traded at $1,450-1,455/tonne ex-tank in the week ended 21 February. This, in turn, capped importers’ buying ideas for replacement cargoes at $1,420-1,430/tonne CFR China as they sought to maintain a trading margin.

On the other hand, some phenol market participants maintained a less bullish outlook, because emerging phenol exports from China, along with reduced operating rates at some regional BPA plants, have boosted the availability of  material in the spot market, tempering the impact of a busy plant turnaround season.

Taiwan Prosperity Chemical Corp (TPCC) has postponed the restart of its 100,000 tonne/year BPA unit in Linyuan to mid-March from mid-January because of mechanical issues. The prolonged BPA unit shutdown has prompted the company to export its surplus feedstock phenol for shipment in February and March, market sources said.

Meanwhile, the domestic phenol price downturn in China between November 2013 and January 2014 opened a window for Chinese phenol makers to export material. While the export sales have effectively tightened supply to domestic buyers, such trade flow only underscored the weakness of downstream demand in China, said a regional end-user.

Furthermore, the recent benzene price decline in China may even prompt some Chinese phenol makers to utilise their spare capacities and ramp up their output, the end-user added.

“A key consumer of phenol in China is the phenolic resins sector, which is feeling the impact of the slowdown in the housing and construction sectors,” the buyer added.

China imported 365,100 tonnes of phenol in 2013, a 39% slump from the 594,000 tonnes purchased in 2012, according to the country’s customs data.

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections