Phenol / Acetone Market
By Li Xin

1. Supply and demand in the world

The capacity of phenol in the world was 9.044 million t/a and the apparent consumption was 8.139 million tons in 2005, an increase of 7.6% and 7.17% respectively over 2004. The production and the demand showed a balanced development. The growth in Asia was the most rapid, being higher than the overall growth in the world. North America, Western Europe and Asia are the major phenol production and consumption regions. The capacity in these regions accounts for more than 90% of the world total and the consumption accounts for more than 80% of the world total. The United States is the largest phenol producer and consumer in the world. Japan comes next. North America, Western Europe, Central and Eastern Europe and Africa have a capacity surplus and there is a supply deficit in other regions.The capacity of acetone in the world was 5.995 million t/a and the apparent consumption was 5.276 million tons in 2005, an increase of 6.6% and 6.7% respectively over 2004. The capacity of acetone in the world is mostly contributed by North America, Western Europe and Asia. The capacity in these regions accounts for 89.4% of the world total, being 32.4% for North America, 30% for Western Europe and 27% for Asia. The region with the greatest consumption is Western Europe and the consumption accounts for around 31% of the world total. Asia and North America come next and the consumption accounts for around 30% of the world total each.   The phenol/acetone capacity expansion in the world has been brisk in recent years. The newly added capacity of phenol will be 630 thousand t/a and the newly added capacity of acetone will be 379 thousand t/a from 2006 to 2008.

2. Supply and demand in China
    (1) Output increased rapidlyThe output of phenol in China was 443.3 thousand tons in 2005. The two construction and expansion units in Sinopec Shanghai Gaoqiao Petrochemical Co., Ltd. and Harbin Branch Company of BlueStar New Chemical Material Co., Ltd. started production respectively in the second quarter and the fourth quarter of 2005. The supply amount in the phenol market has therefore increased. Although the phenol/acetone unit in CNPC Jilin Petrochemical Co., Ltd. suspended production from mid-November 2005 due to the explosion of aniline unit, however, the output of phenol in China still continued to grow at nearly 20% in 2005.   The demand of phenol has increase rapidly since 2000 and the growth is around twice compared with years before 1999. The apparent consumption in 2005 was 12.93% higher than that in 2004.    The consumption of acetone in China has grown rapidly in recent years. The apparent consumption reached around 608 thousand tons in 2005, an increase of 26.89% over 2004. The output growth was not as high as the demand growth. The import amount therefore increased rapidly and the self-sufficiency rate was going down.

   (2) Import increased steadilyAccording to customs statistics, the import amount of phenol in China was around 291.3 thousand tons in 2005, an increase of around 10 thousand tons over 2004. The total import amount accounted for around 40% of the apparent consumption. Based on statistics by import source, the region with the greatest import amount was Europe. Asia and the United States came next.   The price of phenol in the domestic market had a sustained rise for nearly one month and a half from late January 2005. The average monthly import amount of phenol in the first three months of 2005 was around 21 thousand tons. Stimulated by the price rise, the import amount in April increased sharply to more than 40 thousand tons. The new phenol unit constructed by Shanghai Gaoqiao Petrochemical Co., Ltd. in Caojing started production at that time and the market supply amount increased drastically. The market price of phenol therefore had an abrupt downturn in May and June, and the monthly import amount also dropped to less than 20 thousand tons.

   The price fluctuation of phenol in the domestic market was remarkably weakened in the second half of 2005. The import amount was slightly higher than that in the first half of 2005. The amount imported from distant countries and regions was quite big in September 2005 and the import amount in that month was once again more than 30 thousand tons. After the abnormal production suspension in the phenol/acetone unit in CNPC Jilin Petrochemical Co., Ltd. from mid-November, the monthly import amount in the last two months of 2005 was increased to 25 thousand tons.

   According to customs statistics, the import amount of acetone in China was around 337.4 thousand tons in 2005, an increase of 83 thousand tons over 2004. The total import amount accounted for 55.5% of the apparent consumption. Based on the statistics of import source, the region with the greatest import amount was Asia. Europe and the United States came next.   The monthly import amount of acetone hit another historical high in 2005. The import amount in August 2005 reached 37.7 thousand tons and the monthly import amount in April, October, November and December was also more than 30 thousand tons, also being the high in recent years. The increase of the import amount toppled the lasting price stability in the domestic market. The price of acetone started to go down since April and the reduction trend lasted till the end of 2005.

3. Price trend in 2005

The price of phenol in both domestic and overseas markets dropped drastically in the first half of 2005. The main reason was that the concentrated completion of several new units or expanded units at home and abroad caused the increase of market supply and aggravated price competition in sales. Price fluctuations became flat in the second half of 2005 and in the first two months of 2006. The sustained high price of crude oil triggered a rebound of the phenol market, but the rebound margin was quite limited.
    The average annual price of phenol in the domestic market was RMB10 700 per ton in 2005, a drop of RMB1 440 per ton from 2004 and the reduction margin was 11.8%. The closing price at the end of 2005 was RMB8 800 per ton, a drop of RMB4 700 per ton compared with the price at the beginning of 2005 and the reduction margin was 34.8%.    The average annual price of phenol offered by foreign suppliers was US$1 030 per ton (CFR China main port) in 2005, a drop of US$130 per ton from 2004 and the reduction margin was 11.2%. The closing price at the end of 2005 was US$855 per ton, a drop of US$445 per ton compared with the price at the beginning of 2005 and the reduction margin was 34.2%.
    The price of acetone in both domestic and overseas markets dropped sharply in 2005. The main reason was that the concentrated completion of several new units or expanded units both at home and abroad caused the increase of market supply and aggravated price competition in sales. The monthly import amount of acetone in six months of 2005 exceeded the highest historical level of 30 thousand tons. The price of acetone recovered in the first two months of 2006. The sustained high price of crude oil triggered a strong rebound of the acetone market. The price offered by foreign suppliers increased by US$80 per ton and the price in the domestic market was also nearly RMB1 000 per ton higher.   The average annual price of acetone in the domestic market was RMB7 830 per ton in 2005, a drop of RMB850 per ton from 2004 and the reduction margin was 9.8%. The closing price at the end of 2005 was RMB6 250 per ton, a drop of RMB3 050 per ton compared with the price at the beginning of 2005 and the reduction margin was 32.8%.
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