China phenol import discussions near two-year low on poor demand

China’s phenol import discussions levels fell to lowest levels in nearly two years, weighed down by persistent weakness in demand from downstream bisphenol A (BPA), polycarbonate (PC) and caprolactam sectors.

Demand may improve in August as new downstream plants start coming on stream.

Offers for south America-origin phenol surfaced at the low-$900/tonne CFR (cost and freight) China Main Port (CMP) levels.

Buying ideas were below $900/tonne CFR CMP, roughly similar to domestic prices, which were at yuan (CNY) 7,400/tonne ex-tank midweek in east China.

In the week ended 19 July, phenol was assessed at $915-950/tonne CFR CMP, down $50/tonne at the high end of the previous week’s price range, hitting their lowest since 1 September 2017, according to ICIS data.

Spot prices have been on a downtrend since March this year, shedding 21% over the past four months, dragged down by falling values of feedstock benzene and propylene.

Import demand for phenol has taken a beating since end-May, when the China imposed preliminary antidumping duties (ADDs) on imports from the US, Europe, South Korea, Japan and Thailand.

South Korea, the top contributor to China's import volumes in 2018, was imposed with ADD rates of 13.3-23.7%. Thailand, which has the fourth biggest share in the total, was imposed with ADD rates of 11.9-28.6%.

The US was China’s second-biggest source of phenol imports last year, but imports of US material completely stopped since the fourth quarter of 2018 as the trade war between the two countries were fully underway.

China has slapped a 10% duty on US phenol in August in the second round of the tit-for-tat tariff warbetween the two economic giants.

On top of the import duty, China has imposed ADD rates of as much as 129.6% on US phenol.

Saudi Arabia - the third biggest supplier of phenol to China in 2018 - was not included in the ADD probe, which only covered the period January 2014 to October 2017.

PetroRabigh’s 245,000 tonne/year phenol/acetone plant in Saudi Arabia which exports to China started up in 2018.

Many Chinese buyers refrained from importing cargoes, choosing to turn to domestic supply to cover their requirements.

Domestic volumes had traditionally been much higher than import volumes.

Phenol imports in 2018 stood at 419,000 tonnes, representing a 17% share to China’s total consumption.

The unabated decline in phenol prices prompted producers that supply to Asia to schedule turnarounds or cut run rates at their facilities.

In India, Deepak Phenolics shut its plant for a 12-day turnaround from 14 July; in Taiwan, Chang Chun Plastics cut production at its unit to 90% of capacity, while Taiwan Prosperity Chemical Corp (TPCC) is looking at cutting output in September.

In South Korea, Kumho P&B Chemicals Line 2 remained shut, while its Line 3 and 4 were running at below 70% of capacity. LG Chem, meanhwhile, is considering a reduction in operating rates.

In Singapore, Mitsui Phenol Singapore (MPS) is running its plant at a reduced rate of 80%; while in Thailand, PTT Phenol is operating its phenol plant at 85% of capacity.

In Japan, Mitsui Chemicals shut its Osaka-based plant for a month-long turnaround from end-June.

In Saudi Arabia, Petro Rabigh was keeping a 50% run rate at its plant ahead of a turnaround, market sources said.

There is some optimism that phenol demand would improve from August as downstream plants are due to come on stream. The capacities indicated in the table below are in thousand tonnes per year.

($1 = CNY6.88)