China phenol prices rebound despite regional supply gains

MELBOURNE (ICIS)–Spot phenol prices into China rebounded despite the gains in regional supply, market participants said on Monday.

Phenol prices added 2.5% to close at an average of $835/tonne CFR (cost & freight) China on 8 July, following three consecutive weeks of modest gains, ICIS data showed.

Phenol supply in Asia outside China has been boosted by the May start-up of PTT Phenol II in Thailand and the June start-up of Kumho P&B’s new unit in South Korea, on top of increased phenol/acetone capacity utilisation in Singapore and Taiwan.

Despite the gain in Asian cargo availability, a tighter phenol supply outlook, spurred by the upcoming G20 Summit at Hangzhou, is boosting demand for spot imports and buoying prices.

Higher raw material benzene prices and the domestic phenol market rally added further fuel to the firming CFR China phenol price trend.

Benzene prices closed at an average of $639.50/tonne FOB (free on board) Korea on 8 July, up by 5.9% following three straight weeks of gains, ICIS data showed.

Domestic phenol supply in China is expected to be constrained in August by routine plant maintenance and the G20 Summit. 

Petrochemical plants in major east China cities must cut production or halt operations ahead of the G20 Summit, which will take place on 4-5 September, to ensure improved air quality. The order came from the municipal governments of the cities, which include Shanghai and Ningbo.

Shanghai Sinopec Mitsui Chemicals (SSMC) plans to shut down its plant from 1 August to mid-September.

Formosa Chemicals & Fibre Corp (FCFC) is widely expected to halt its Ningbo operations in August although the schedule has yet to be finalised.

Sinopec Sabic Tianjin is scheduled to commence a 40-45 day turnaround on around 10 August, according to production data compiled by ICIS China.

Shandong Lihuayi also has plans to undertake a routine turnaround in August, ICIS China production data showed.

On the domestic front, spot phenol prices in east China rallied 8.2% in the three weeks ended 8 July, paring an 11% slump, according to ICIS data.  

While higher raw material and domestic prices portend further phenol price gains, the list of potentially negative factors is also growing.

On top of capacity expansion in Asia, demand for phenol has been sapped by the decreased operating rate in the key downstream bisphenol A (BPA) sector in Asia, stemming from production cutbacks, delayed restart and scheduled maintenance.

BPA output cuts by Taiwan’s Nan Ya Plastics has led to higher phenol exports from Taiwan.

In South Korea, a technical glitch had delayed the restart of Samyang Innochem’s 150,000 tonne/year BPA plant from a routine turnaround.

Samyang Innochem on 3 July restarted its plant, behind the original schedule of around 18 June.

And in southeast Asia, PTT Phenol on 20 June shut down its integrated 150,000 tonne/year BPA plant for a turnaround. The BPA plant turnaround is expected to last until at least mid-July.

Higher Japanese demand had been a supporting factor to the underlying supply/demand fundamentals in northeast Asia.

A major, two-month turnaround at Japan’s Mitsubishi Chemical had boosted Japanese phenol imports, curtailing South Korean spot exports since April.

However, with Mitsubishi Chemical’s turnaround nearing completion, diminishing Japanese spot demand has prompted a South Korean producer to turn to the spot market to manage its surplus volume, reviving South Korea-to-China trade.

The slump of the CFR India phenol market since early May, along with India’s decision to end the levying of antidumping duties (ADDs) on Thai and Japanese phenol, has, for now at least, put an end to further China-to-India trade. This also means that the phenol produced in China will stay in China.

CFR India phenol prices closed at an average of $900/tonne CFR India on 8 July, rendering Chinese phenol priced around $940/tonne FOB China clearly unworkable, given the $70-80/tonne ocean freight rate.

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

Additional reporting by Helen Han

Focus article by Trisha Huang