Introduction:
Towards the end of June and beginning of July, phenol/acetone units at Shenghong Petrochemical and Longjiang Chemical successively entered maintenance shutdowns, keeping spot supply pressure moderate. Prices trended upward late in June. However, in early July, lower feedstock costs combined with reduced end-user inquiries led to weaker sales, prompting suppliers to offer concessions. This downtrend lasted only two working days. As feedstock costs strengthened, phenol suppliers' sentiment improved, and willingness to offer discounts diminished, shifting the market from weak to strong. On July 8, the rise in pure benzene accelerated, fueling phenol's upward momentum. The bullish trend stimulated buying interest, but as prices climbed higher, end-users became more cautious in their purchases. In the near term, the market needs to track feedstock cost and supply-demand fluctuations, while keeping watch for external environment changes and the risk of a trend reversal if high costs fail to pass through smoothly.
I. Centralized phenol/acetone unit maintenance lowers industry operating rates; phenol spot supply remains unpressured.
From late June to early July, several units went offline as planned. As of press time, the overall operating rate of the domestic phenol/acetone industry was at a relatively low level of about 65%. At this low operating rate, spot phenol supply pressure is limited. The impact of this bullish factor depends on feedstock cost trends and end-user buying intentions. Three companies – Jiangsu Ruihang, Gaohua Materials, and Lanzhou Hapy – have restarts expected soon. Attention should be paid to their restart timelines and subsequent operating loads. The industry operating rate is projected to gradually recover to around 75%. Notably, Gaohua Materials' downstream bisphenol A unit will start up simultaneously with the phenol/acetone unit, while the pickup restrictions at Jiangsu Ruihang may be lifted. Overall, the impact on spot supply is expected to be limited.
II. Pure benzene strengthens; cost-side bullishness boosts phenol upwards.
On June 4, the price inversion between East China phenol and pure benzene was substantially corrected, with the spread gradually recovering to 600–900 yuan/ton. In July, the prices of the two have become highly correlated, with a correlation coefficient as high as 0.97.
From late March to late April, after a period of profitability, phenol/acetone producers fell into losses. In June, phenol showed stronger downside resistance than acetone amid alternating gains and losses. Acetone prices kept declining, widening the spread between the two to around 3,000 yuan/ton. Entering July, the acetone market rebounded strongly, driven by feedstock costs and unplanned short-term unit shutdowns. Phenol prices also received a boost. Meanwhile, the prices of both feedstocks (pure benzene and propylene) increased to varying degrees. Although the industry's gross margin has recovered somewhat, it remains in negative territory.
III. Inquiries and end-user replenishment interest during the price rally.
During the phenol price rally, periodic inquiries contributed to the upward momentum. When pure benzene prices strengthened, overall buying interest temporarily increased. However, acceptance levels varied once prices were pushed to higher levels. Further advances led to slower transactions, curbing price gains and reducing trading volumes. This is the current market reaction being experienced.
Near-term phenol market outlook.
Currently, the strong pure benzene market provides support, though high prices may trigger resistance from downstream buyers for essential needs. The pure benzene market is expected to show some retreat from highs in the next period, while the average price will still be higher than this period. The phenol market similarly faces cautious end-user attitudes toward chasing high prices. However, with tight spot supply, suppliers are reluctant to offer discounts or concessions. The market may follow a pattern of opening high and closing low, with slower gains. If demand fails to keep pace, a modest rational pullback is possible, but the extent is expected to be limited and controllable. Cautious operations are advised.
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