Synchronous Growth in Domestic Phenol Production and Demand


1. Production rose

As of 2011 there were major five phenol producers in China including Sinopec Shanghai Gaoqiao Petrochemical Co Ltd, Sinopec Beijing Yanhua Petrochemical Co Ltd and Sinopec SABIC Tianjin Petrochemical Co Ltd. Among them, Sinopec Shanghai Gaoqiao Petrochemical Co Ltd is China's largest phenol/acetone producer with a capacity of 360 thousand t/a. Sinopec SABIC Tianjin Petrochemical Co Ltd comes next with a capacity of 350 thousand t/a. China produced 704 thousand tons of phenol in 2011, a slight year-on-year increase.

Table 1 Major Phenol Producers in China   (kt/a, kt)

Producer    Capacity of phenol/acetone    Output of phenol in 2010    Output of phenol in 2011
Sinopec Shanghai Gaoqiao Petrochemical Co Ltd    360    201    174
Sinopec Beijing Yanhua Petrochemical Co Ltd    260    156    131
Sinopec SABIC Tianjin Petrochemical Co Ltd    350    75    171
PetroChina Jilin Petrochemical Co Ltd     120    78    68
Bluestar Harbin Petrochemical Co Ltd    125    76    58
Kingboard Chemical Holdings Ltd (Guangdong)     200    101    102
Total    1 415    687    704
Source: CNCIC


2. Import drastically increased

With the domestic growing demand and the overhaul schedule of petrochemical enterprises, the import amount of phenol in China increased significantly in 2011. China imported 762 thousand tons of phenol in 2011, a year-on-year growth of 22%. The export amount of phenol from China decreased slightly. From the view of the regional distribution, China's import of phenol is mostly concentrated in Nanjing, East China's Jiangsu province as the supply of phenol in North China mainly comes from North China Sales Company, while the production of phenol in East China mainly feed the bisphenol A units in Sinopec Mitsui Chemicals Co Ltd and Bayer MaterialScience Shanghai. And the phenol produced in East China can not meet the local downstream demand.

Table 2 Production and Consumption of Phenol in China 2009-2011 (kt)

Year    Output     Import     Export    Apparent
                consumption
2009    529    557    10    1 076
2010    688    624    40    1 272
2011    704    762    38    1 428
Source: CNCIC


3. Bisphenol A demand boosts phenol market

China produced 704 thousand tons of phenol in 2011, compared with 687.8 thousand tons in 2010. The amount of phenol imported to China was 762 thousand tons in 2011, up 22% year-on-year. China exported 38 thousand tons of phenol, a slight decrease compared to that in 2010. The apparent consumption of phenol in China reached 1.427 million tons for 2011, an annual rise of 12.2%. By analysis of downstream applications, the consumption share of phenol for phenolic resins has still been the largest and reached 39.2% in 2011. Bisphenol A came next and took 26% in the phenol consumption proportion in 2011 compared with 8% in 2010. In the next 3 or 5 years, the bisphenol A sector is expected to be the driving force for phenol demand in China. However, the supply growth of phenol will be significantly larger than the demand growth of phenol that would bring the serious oversupply of phenol in China.

Table 3 Consumption Mix of Phenol in China (kt)
Consumption sector   2010 Consumption    Proportion (%)    2011 Consumption    Proportion (%)
Phenolic resin    574    41    615    39
Bisphenol A    308    22    405    26
Salicylic acid    126    9    133    8
Nonyl phenol    84    6    91    6
Others    308    22    321    21
Total    1 400    100    1 565    100
Source: CNCIC


4. Market trend projection

In 2011, the price of phenol in China presented an irregular fluctuation. The price fluctuated slightly in the first half of 2011. In mid and late May, the price of phenol dropped sharply mainly due to the slack demand, to the low level of RMB12 300 per ton, and then it rebounded driven by the relatively low inventory of phenol enterprises as well as the price rise of raw materials. However, the end market demand for phenol strongly restricted the price rise of phenol, in late 2011 the price of phenol fluctuated and showed an overall downward trend.
   In the next two or three years, China's capacity of phenol will expand significantly and the newly added capacity is expected to be around 1.42 million t/a by 2015. With the constant expansion of phenol capacity, the demand for imported phenol in China will gradually reduce and China-made phenol will possibly replace imports.
   By the current market region pattern, East China market will still lead the nation's overall phenol market. It is expected that in the second quarter of 2012, the phenol market will show a range of shock, the market price of phenol will fluctuate. In the third quarter of 2012, the enthusiasm of both buyers and sellers to enter the high-end market will be encouraged in the brisk season of September and October and the price of phenol is expected to climb. In the fourth quarter of this year, the market price of phenol will show an interval fluctuation, the overall market will be slack and the trading will gradually slow down.