US June phenol down, but benzene spike prompts worries for July

Larry Terry

01-Jul-2014

US June phenol down, but benzene spike prompts worries for JulyFocus story by Larry Terry

HOUSTON (ICIS)–Although US phenol contract values settled lower for June last week, prices are headed sharply higher for July on a worrisome spike in the benzene contract, sources said on Tuesday.

June phenol contract values fell by 1.22 cents/lb ($27/tonne), in line with June’s softer upstream values, taking phenol down to a new range of 79.61-84.06 cents/lb, as assessed by ICIS. Feedstock June benzene weakened by 9 cents/gal on improved supply from Asian exports, dropping to $4.48/gal from $4.57/gal the previous month.

However, the July benzene contract settled up by 80 cents/gal on Tuesday, climbing to $5.28/gal, pressured upward by benzene spot prices, downstream demand and tight supply, sources said.

A phenol source had warned that if benzene settled sharply higher in July, “phenol could get ugly,” pushing up the price of derivatives such as bisphenol-A (BPA) and polycarbonate (PC), and making phenol even more difficult to buy and sell in a market already beset by below-par demand.

The July benzene increase could heighten July phenol contracts by at least 10 cents/lb, which would be “devastating” to the point that some buyers may consider substitution, a source suggested.

In at least one downstream market, a suggested alternative to phenol is polymeric diphenyl methane diisocyanate (pMDI), a source said. “And once that conversion (including capital investment and retrofits) is made, there is no going back.”

“This (benzene hike) is really bad news. Hopefully it will be short lived,” the buyer said. “I think if benzene prices fall back then it will not be an issue. But if they remain at these inflated prices, then there is risk.”

In the co-product acetone market, barge contract values dropped by 4 cents/lb for June, with sources citing downward pressure from softer RGP prices.

Downstream, US May single-family home sales surged, as did existing home sales, despite contraction in the broader US economy.

According to the US Commerce Department, the domestic economy shrank by 2.9% on an annualised basis in Q1, the sharpest decline since the 5.4% downturn seen in Q1 2009 in the midst of the Great Recession.

Major US phenol producers include Axiall, Dow Chemical, Haverhill Chemical, Honeywell, INEOS Phenol and Shell Chemical.

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