European Feedstock Update
Europe phenol, acetone industry feeling Asia price pressure
Asian phenol and acetone prices have fallen further this week, following lower feedstock benzene and propylene prices. This has added to the weakness caused by oversupply after three new world scale plants opened in China.
The impact in Europe is being felt primarily in acetone, which is easy to transport. Buyers and distributors both talked of ordering cargoes for arrival into Europe.
“The arb [arbitrage] window is open and some quantities are already moving to Europe. Spot prices in Europe are on a decreasing trend,” said a distributor.
The pressure is expected to continue, with some now talking of potential for downward movement on contracts too.
“Acetone – I am looking around. For the contract, it’s time to have a look at the ratio [with propylene]. It’s in buyers and sellers interest. The US will sell acetone for export,” said a major acetone buyer.
On phenol, the impact is less noticeable as the logistics are more difficult.
“I don't think that there will be imports from Asia for phenol because the setup is missing. There are not really people who are having a structural business like that and there are less customers who buy on CFR [cost & freight] basis for such high volumes,” said a distributor.
However, the strong arbitrage between Asia and Europe is reducing phenol producers’ ability to raise adders – the pricing differential between benzene and phenol. The danger is that if the economic benefit of Asian imports were strong enough, buyers would invest in infrastructure.
“It’s very recent, the price moves in Asia. The gap is become bigger… Given the situation in Asia we will not accept increases [to adders],” said a phenol buyer.
Producers are quick to point out that tightness in the European market is leading to some success in adder increases.
“Phenol short term is very tight and whilst major contract buyers are pushing back requests for adder increases some customers have accepted higher adders for prompt spot material,” said a producer.
The other danger with the price differential is that recent improvements in demand could falter, with imports becoming more competitive again.
“Market demand despite prices in Asia is still fairly good, better than we all expected,” said the producer.
“European demand has not increased. Production has increased, as there are less imports… If structurally benzene is higher in Europe [this could change],” said a buyer.
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