China phenol import prices at near four-year high on tight supply

26 September 2018 04:42 Source:ICIS News

SINGAPORE (ICIS)--China’s phenol import prices are at their highest in nearly four years on the back of tight supply due to a slew of shutdowns at major domestic facilities.

Phenol is used to produce phenolic resins which in turn are used for making exterior plywood. (Source: Imaginechina/REX/Shutterstock)

- Limited domestic supply boosts prices

- Exporters raise offers

- Demand to improve on downstream expansion

In the week ended 21 September, prices were assessed flat week on week at $1,390-1,450/tonne CFR (cost & freight) CMP (China Main Port), up 10.5% from August, according to ICIS data.

Prices were last higher on 24 October 2014, with the mid-point at $1,470/tonne CFR CMP.

The sharp rise in prices was due to plant shutdowns in China from August.

Buyers had to turn to imports to sustain their requirements while local production was low.

In 2017, deep-sea cargoes – from the Middle East, the US and EU – accounted for around 40% of China’s total phenol imports; while Asia-origin cargoes from South Korea, Japan and Thailand accounted for 50% of the total.

However, buying interest for US and EU phenol dwindled after antidumping investigations started on 26 March.

Although the investigations included South Korea, Japan and Thailand, importers were more cautious towards procurement of US cargoes, given their history of competitive prices compared with Asia-origin cargoes.

Buying interest for US cargoes took a further dip in August, as phenol is included in China’s list of products on which a 10% tariff will apply starting 24 September, amid the trade war between the world’s two biggest economies.

“We don’t want to take the risk of importing US cargoes now, only to pay additional duties when they arrive two months later,” a trader said.

US cargoes, which were typically prioritised for the Chinese market, had to be negotiated in other parts of northeast Asia, including Taiwan, at offers lower than the assessed CFR CMP China price range.

For the rest of Asia, spot volumes were limited amid some outages as regional producers traditionally dedicate output to fulfilling contractual obligations.

In Japan, Mitsui Chemicals plant was shut from early June to 14 August, while in Thailand, PTT Phenol’s two plants had an outage on 7-9 August.

A start-up of Deepak Phenolics’ new plant in India on 16 August offered little respite to the tight supply situation in Asia.

In order to secure Asia-origin cargoes, China-based buyers had to match the higher-priced offers.

“It is a difficult time for us. The domestic yuan currency has plunged against the US dollar. It means we have to import at nearly $100/tonne higher now as compared with the stronger yuan rate just a few months ago,” an importer said.

China’s demand for phenol is expected to strengthen and underpin firm prices in the near term, due to expansion of downstream facilities.

These include China Petrochemical Development Corp’s (CPDC) 150,000 tonne/year cyclohexanone unit, which is expected to start up toward year end.

“Other downstream sectors may not be able to absorb the high prices, and may cut phenol consumption to reduce operating rates,” an end-user said.

“We have to further observe the market trends after the Golden Week [in October],” the end-user said.

($1 = CNY6.87)

Focus article by Angeline Soh

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By Angeline Soh