August contract
The August European phenol contract price has increased by €132/tonne following the same increase in the value of the August benzene contract price.
August phenol settled on a pre-discounted basis at €1,430-1,470/tonne FD NWE, up €132/tonne from July.
Phenol contracts in Europe are 100% linked to feedstock benzene, with the supply-and-demand dynamics of the market having little influence over the contract price.
In relation to current supply and demand in Europe, availability is tight following the force majeure declared by INEOS Phenol on 15 July because of feedstock cumene supply problems.
Demand is still strong despite the summer holiday period. Concerns regarding availability in September are now being raised as offtake is likely to increase then, as players return to business.
Production
INEOS Phenol said BP Refining & Petrochemicals (BPRP) declared force majeure on cumene at its plant in Gelsenkirchen, Germany, because of technical problems, on 13 July. As a result, INEOS Phenol had to reduce production to 50%.
Dow declared force majeure on cumene from Terneuzen in the Netherlands on 15 July because of a problem with the catalyst there. In relation to the severity of the problems at BPRP and Dow, INEOS Phenol said it did not know how long the problems would last.
News of the phenol shortage has caused much concern in the market, especially as INEOS Phenol has a four-week turnaround planned at its plant in Antwerp, Belgium, in September. The plant has two lines with a combined capacity of 680,000 tonnes/year of phenol and 480,000 tonnes/year of acetone. Usually the company would be building stocks at this time.
European producer Novapex started its two-week planned turnaround in Roussillon, France, on 28-29 July. The plant is due back up around 13-14 August.
Further compounding the availability problems for some buyers is the permanent closure of Slovnaft’s 40,000 tonne/year phenol plant and its 25,000 tonne/year acetone plant in Bratislava, Slovakia. The closure has generated new demand for European producers, but most are not in a position to supply because of their stock positions.
Spot
The spot range moved up by €95/tonne at €1,200-1,250/tonne FD NWE. Sources said spot could trade at €350-400/tonne over the benzene price, with one trader suggesting prices at €500/tonne above benzene were possible due to the tightness.
Derivative markets
European August bisphenol-A (BPA) contracts are expected to fall by €30-100/tonne in the next two weeks. Producers warned that it is hard to obtain enough phenol and it is only going to get worse in September when demand for both phenol and BPA generally picks up.
The economic situation in Europe has been high on the agenda of many players. A number of sources said the market seemed unusually quiet. They said that economic uncertainties in southern European states and the euro crisis have all negatively impacted the market. Many players have become cautious and are not willing to buy large quantities of material as they do not want to be left with expensive material in case prices drop.
European polycarbonate (PC) players have given mixed feedback about the market. Some said demand remains healthy while others worry because the market is quiet. August is traditionally a slow month for consumption because plants traditionally shut during the holiday period for maintenance. Demand usually picks up from September onwards when buyers stock up new material. However, some now expect September to remain quiet because buying interest drops in uncertain economic times .
European August epoxy resins contract negotiations are under way and expected to settle by the end of next week. A reduction of €70-150/tonne is expected by most market players because of slowing demand and improved product availability.
Players this week confirmed that the caprolactam (capro) market remains very tight. This is primarily because of supply issues.
The force majeure on supplies at UBE Chemical Europe’s Castellon plant in Spain remains in place, a company source said. It is still experiencing difficulties in bringing the 95,000 tonne/year plant up after four weeks of planned maintenance. The source could not say when it would be possible to lift the force majeure.
European demand is said to be relatively quiet in the textiles market, although engineering plastics continue to be quite strong, except for southern Europe. The slowdown in textiles is mainly because of the summer holidays lull but one buyer said its downstream buyers were more reluctant than usual to commit themselves to orders for September and October.
Players in the European adipic acid market this week confirmed that it continues to be long. Substantial quantities of material are seen in the European arena from the USA, Asia and Ukraine. Buyers say it is the presence of the imports that accounts for the current length of the market.
Russia
Russia's phenol spot rouble (Rb) prices are marginally down this week to Rb61,500-66,500/tonne EXW. Domestic phenol Rb numbers weakened with a background of discounted sales by some local producers, including Kazanorgsintez. Russia's phenol prices are expected to remain under pressure in August.
Russian domestic numbers include 18% VAT.
Export
There are hardly any volumes available for export, although contract cargoes are still going to Asia. Sources said it was difficult to give an estimated range at this time.
However, it is thought that $1,650/tonne FOB is realistic for any export opportunities.
Asia
In Asia, spot prices rose for a second week and are at $1,580-1,780/tonne China Main Port. The gains were fuelled by rising domestic prices in China.
Feedstocks
The European August benzene contract has been agreed at €886/tonne, up €132/tonne from the previous month, two consumers said on Friday. The settlement was made at a US dollar concept of $1,263/tonne FOB NWE and converted to the euro price at the officially agreed exchange rate of €1 to $1.4255. A sizeable increase was expected for August, as firming global markets and some short covering have pushed domestic spot prices up by nearly $200/tonne during July.
The European propylene contract settled at €1,115/tonne FD NWE for August, down by €15/tonne from July. This was the second number to emerge after an initial rollover settlement failed to find the necessary support from the market. While feedstock is firm, the bearish supply-and-demand balance continues to weigh on spot levels, but sources say these are showing signs of stabilising around €900/tonne CIF NWE.
Covering editor: Helena Strathearn
($1 = €0.70)
(€1 = Rb39.48)
This week on ICIS ( www.icis.com ):
27/07/2011 09:05 August capro contract offer at $3,450/tonne CFR NE Asia
27/07/2011 06:57 China’s Shandong Hongye adipic acid unit ops normal after restart
26/07/2011 16:40 US July barge acetone contracts fully settle down by 7% from June
23/07/2011 00:59 BPA July contract settles at €1,700-1,800/tonne FD NWE
