Europe phenol tight with improvement in demand

14 March 2014 15:57 Source:ICIS News

LONDON (ICIS)--European phenol producers and consumers on Friday pointed to continued tightness, with most seeing some improvements in demand.

“It’s a very good time for phenolic resins producers,” said a phenol buyer.

“January and February are better than a year ago. March is strong enough thanks to weather etc. We produce better volumes than a year ago in same period,” it added.

Bisphenol-A is also said to be seeing stronger volumes, thanks in part to more limited Asian imports.

In addition, many market participants are still reporting lingering supply issues from earlier storms in the Atlantic. Logistics problems had hit Spain’s CEPSA, the second largest phenol producer in Europe. A CEPSA source said shipping problems were for the moment solved.

“Right now [we have] no logistics problems anymore,” it said.

However, the problems still mean other producers have picked up incremental volumes.

As a second buyer said: “Most phenol manufacturers are very happy - someone has to fill the gap”.

The supply imbalances come at a time when the phenol industry is running low operating rates and cannot instantly adjust to changes in demand.

“Phenol is long [if you] look at production rates but physical availability is an issue on short notice. We are all producing hand-to-mouth - we receive demand of customer and only produce that. As soon as they require a few metric tonnes extra and want within next few days - it’s almost impossible to find that,” one producer said last week.

“[Producers] might be able to produce phenol but might not be able to secure benzene - [they] don’t produce more than needed. Everyone happy to sell more material as long as know 3-4 weeks in advance,” said the second buyer.

“Phenol [availability] has been a bit of an issue – we have had to fine tune and manage a little closer,” said a third buyer.

Operating rates have risen a little according to some sources but still lie below 80%. One buyer said for the industry to be in balance, long-term operating rates needed to be around 85%. With additional capacity being brought on in China over the next few years, he saw the need for further rationalisation of supply.

“We see rationalisation of 250kt [thousand tonnes]. Need 1mt [million tonnes] to be balanced,” said the buyer.

By Rhian O'Connor