India phenol soars to 21-month high

Spot phenol prices into India may extend gains after reaching a 21-month high as supply tightens up amid escalating raw material benzene prices, market participants said on 7 February.

Spot phenol prices closed at an average of $1,100/tonne CFR (cost & freight) India on 3 February, having amassed 35.8% of gains from eight consecutive weeks of run-up, according to data compiled by ICIS.

The prices were last higher in May 2015, ICIS data showed.

The bullish momentum in the CFR India phenol market has been fuelled by a combination of supply constraints, declining inventories and the renewed benzene price escalation.

Raw material benzene prices were at $1,040-1,050/tonne FOB (free on board) Korea at noon on 7 February, following an 8.4% weekly gain for the week ended 3 February, according to data compiled by ICIS.

Co-feedstock propylene prices in northeast Asia have also been strengthening as the cracker turnaround season in Asia gets under way.

Phenol stockpiles at Kandla dropped to 24,000-25,000 tonnes on 3 February from roughly 29,000 tonnes the week prior, an importer said.

A phenol production issue in South Korea and lower regional output ahead of the shutdown of PTT Phenol and Formosa Chemicals & Fibre Corp (FCFC)’s plants in early March for maintenance presage tighter forward supply.

South Korean producer Kumho P&B has had to shut down its two operational phenol/acetone units because of a mechanical problem that occurred on the evening of 2 February.

Prior to the unplanned outage, the producer had been running the plants at a reduced rate. And in southeast Asia, Mitsui Phenols Singapore has been running its phenol/acetone plant at 80% capacity since the start of 2017.

An ongoing tightness in raw material benzene and propylene supply, along with the high costs of the feedstock relative to phenol and acetone prices, has been an impediment to a higher production level.

Thai producer PTT Phenol’s older plant will be off line from 1 March to 14 April. Operations at its new unit “PTT Phenol II” will also be halted for 10 days in April to facilitate equipment modification.

To build up its inventories ahead of the turnaround, the producer has put its customers on allocations throughout the first quarter. Taiwanese producer FCFC’s phenol/acetone plant is scheduled to undergo maintenance between early March and mid-April.

The overhaul will also result in a phenol supply shortfall to its affiliated downstream bisphenol A (BPA) maker Nan Ya Plastics. Nan Ya may need to purchase roughly 25,000 tonnes of phenol on a spot basis to fill the supply gap, market sources said.

On top of the potential demand by Nan Ya, strong margins in the downstream cyclohexanone and caprolactam sectors are sustaining additional Taiwanese buying interest for spot phenol, according to market sources.

Additionally, China-based CEPSA Chemical (Shanghai) has plans to undertake a month-long turnaround and this is likely to start in the second half of March, market sources said.

“March is set to be the tightest month in terms of phenol supply in Asia,” a trader said.

On the domestic front, the rupee-denominated domestic phenol prices in India have rallied in response to the strong gains in international benzene prices and the anticipated tightening in forward phenol supply. The benchmark Kandla phenol prices settled at Indian rupees (Rs) 85-86/kg ex-tank on the evening of 6 February, up from the 3 February close of Rs80/kg ex-tank, several importers said.

Additionally, the China-to-India arbitrage may soon be closed by the strong post-Lunar New Year holiday gains in the China domestic market and the corresponding increase in the US dollar-denominated export offers.

China had sold a total of 12,000-13,000 tonnes of January- and February-loading phenol to India. Spot phenol prices in east China closed at yuan (CNY) 8,500-8,600/tonne ex-tank on 6 February, a surge of CNY900/tonne from 26 January, the final trading day before the holiday, according to data compiled by the ICIS editorial team in China.

The latest east China phenol price translates into a US dollar-denominated export parity of $1,125-1,130/tonne FOB China. At the forefront of many phenol market participants’ mind is how much longer the bullish momentum in benzene prices can be sustained.

“Most people think that the benzene price uptrend will continue until at least March or April because of the persistent tightness in that market,” the trader added. ■