OUTLOOK ’19: Europe acetone, phenol markets back to normal soon with uncertainty approaching

Pavle Popovic

31-Dec-2018

LONDON (ICIS)–It is most likely back to ‘normal’ for the European acetone and phenol markets at the start of 2019 following production issues in the fourth quarter of 2018.

However, it is beyond these first few months that uncertainty begins to pick up, at least in the phenol market.

Availability issues for both products arose after Swiss-headquartered seller INEOS Phenol declared a force majeure at the end of October at its Gladbeck and Antwerp plants.

This led to a large supply gap as capacity at the Gladbeck facility is 405,000 tonnes/year for acetone as well as 650,000 tonnes/year for phenol, with Antwerp at 500,000 tonnes/year for the former product and 680,000 tonnes/year for the latter.

These sites, which represent around half of European capacity for each product, were operating at reduced rates due to feedstock cumene supply difficulties as well as low river Rhine water levels.

But, by the end of 2018 these conditions were beginning to reverse and this led to expectations among sources of increased availability for acetone as well as phenol in the new year.

“Feedstock cumene is getting more available. Water levels in the Rhine are getting better,” said an acetone reseller.

“So, gradually the machine will start grinding again…that means that phenol production will be jacked up again. So, acetone will become more available.”

But, it is the definition of ‘normal’ that is key for the future of these markets.

Acetone was lengthy for most of 2018 and phenol was tight with opposing demand for both products.

Most market participants accept that this has become the structural norm and more phenol quarterly adder contracts were agreed for 2019 in preparation for these dynamics continuing.

Fundamentals may subsequently revert back to high availability for acetone and lack of product for phenol once production issues fully resolve.

Nonetheless, discussions among participants have begun to centre around when these conditions could reverse with the phenol market particularly looking at the second quarter as a period of change.

Sources argued that the softer Asian phenol spot trend in the fourth quarter could lead to imports and that general weak macroeconomic conditions at the end of 2018 may eventually result in a dampening of global demand.

Consumers were also prepared to look to alternatives where they could for phenol spot or contractual volumes by considering imports on a structural basis.

“It may well be that if there is a structural change…some of the customers will then, if their contract allows…shift volumes to imported material,” said a seller.

The acetone market will be watching future phenol contract fee talks eagerly and will keep an eye on Asian price movements too.

This is as a softer trend in the Asian acetone spot market in the fourth quarter could potentially cause imports to arrive in Europe from the start of 2019 and beyond.

Such an eventuality would only serve to complicate future European acetone and phenol pricing discussions further, which is more likely to affect the latter market than the former.

Phenol is used in the preparation of resins, dyes, explosives, lubricants, pesticides and plastics.

Acetone can be used in solvent applications and in the manufacture of chemicals for the coatings, plastics, construction and automotive industries.

READ MORE

Global News + ICIS Chemical Business (ICB)

See the full picture, with unlimited access to ICIS chemicals news across all markets and regions, plus ICB, the industry-leading magazine for the chemicals industry.

Contact us

Now, more than ever, dynamic insights are key to navigating complex, volatile commodity markets. Access to expert insights on the latest industry developments and tracking market changes are vital in making sustainable business decisions.

Want to learn about how we can work together to bring you actionable insight and support your business decisions?

Need Help?

Need Help?