Investigating the Core Drivers Behind Phenol's Outperformance in Early October

Lead-in: Before the National Day holiday, the inverted price spread between phenol and pure benzene continued to widen, peaking at 2,450 yuan/ton on September 29. Driven by strong cost trends and aggressive price-hiking intentions from Shandong plants, phenol prices rose steadily. After the holiday, raw material pure benzene prices generally increased with limited declines, making it difficult for the inverted spread against phenol to ease significantly. Phenol producers became more proactive in pushing prices up, stabilizing above the 9,000 yuan/ton mark. However, due to poor pass-through of high costs to downstream sectors, the rise in phenol prices was accompanied by periodic pullbacks. Market volatility remains a key focus moving forward.

High Costs Drive Phenol Upward, Limited Recovery in Inverted Spread with Pure Benzene

From late August to the present, phenol has remained in an inverted spread situation relative to pure benzene. The spread widened from an initial range of 100–200 yuan/ton to a peak of 2,000–2,500 yuan/ton, and currently fluctuates above 1,000 yuan/ton. Although high costs have driven phenol market prices upward, the magnitude of the price increase has not kept pace with rising costs. Price hikes were largely pulled by increases in pure benzene prices but were constrained by low terminal demand and weak buying interest during this period.

Industry Operating Rates Fluctuate Amid Losses in the Phenol-Acetone Sector

Table 1: Summary of Recent Maintenance Activities for Domestic Phenol-Acetone Units (Unit: 10,000 tons/year)

As of now, four known phenol-acetone units are scheduled for shutdown in October. Among them, Yangzhou Shiyou is implementing operations such as limiting offers, suspending shipments, and reducing contract volumes. Apart from these shutdowns, some other units are operating at reduced loads. Overall industry operating rates are fluctuating around or slightly above 80%. Since early October, profit losses for phenol-acetone enterprises have exceeded 1,000 yuan/ton. If these losses persist without recovery, changes in overall industry operating rates will remain a critical factor to watch.

Inefficient Cost Pass-Through Creates Resistance

Currently, the phenol market struggles to maintain a one-way trend due to the interplay between high costs and low demand. Phenol prices have been lower than pure benzene prices for over a month, with the current inverted spread still exceeding 1,000 yuan/ton. Movements in pure benzene prices significantly impact phenol. When pure benzene rises, profits in the phenol-acetone sector are squeezed, prompting suppliers to push prices uniformly. This tends to lift the phenol price center, although transaction volumes do not increase substantially. Conversely, if pure benzene falls, it dampens end-user purchasing sentiment, increasing sales resistance for suppliers and leading to corresponding price drops, resulting in a mixed market trend.

Post-Holiday Outlook: Analyzing Phenol Trends Based on Costs and Supply-Demand Dynamics

The phenol market currently faces several challenges:

1. Large Inverted Spread: The significant gap between phenol and pure benzene prices is unlikely to narrow effectively in the short term. Resolution requires a gradual approach, starting with reducing the inverted spread. Since phenol prices closely track pure benzene, this process will take time and must be evaluated alongside supply-demand fundamentals.
2. Persistent Losses: Phenol-acetone producers have faced losses exceeding 1,000 yuan/ton for half a month. With high-cost conditions continuing, achieving a reduction in losses to below 1,000 yuan/ton in the short term appears difficult.
3. Weak Demand Support: Terminal users show limited willingness to chase higher prices, and acceptance of elevated levels is mediocre. Most purchases following price pullbacks are driven by rigid demand. Without significant fluctuations in demand sentiment, there is little support for sustained price increases.

As of now, the average monthly price of phenol is approaching 9,300 yuan/ton. If cost pressures remain high, the phenol price is likely to find support above the 9,000 yuan/ton level.