By Rao Xinghe

Trade environment is whirling

With the constant expansion of phenol/acetone units and the release of new capacities, the capacity of phenol in China increased rapidly during 2012-2015. No new units started production in China during 2016-2017, the rapid capacity expansion was temporarily halted, and the total capacity of phenol was stabilized at over 2.40 million t/a. The 350 kt/a phenol/acetone unit in CNOOC Huizhou Petrochemical Co., Ltd., was smoothly put on stream at the end of May 2018 and products were sold to markets. The total capacity of phenol was therefore increased to nearly 2.70 million t/a. Including the raw material cost, the price of phenol was on the high side in 2018. The environmental pressure was still quite significant and the demand follow-up was insufficient. The phenol/acetone unit in CNOOC and Shell Petrochemical Co., Ltd., failed to restart production after its shutdown at the end of August. The output of phenol in China was 1.75 million tons in 2018, only a slight increase of around 3% over the previous year.

   By mid-December 2018, the average operating rate of phenol units in China was already over 80%, being much higher than past years. The price of phenol made a downslide of US$350/t to US$1 050-1 150/t at the end of December. All phenol plants in China restored operation one after another in January 2019 and the high operating rates will likely last for a considerable period of time. 

Demand growth is lagging

   The supply of phenol in Asia is on the increase. The supply is going up in China. For example, the 470 kt/a phenol unit in Zhejiang Petrochemical Co., Ltd., is expected to start production in the first half of 2019, and the domestic demand can be better satisfied at that time. Petro Rabigh of Saudi Arabia put its 470 kt/a phenol plant onstream at the beginning of 2018. Deepak Phenolic Plastics of India also launched a 200 kt/a phenol plant in August 2018. For the price of phenol, all these are inhibiting factors.

   In terms of demand, with the completion of a large number of new bisphenol A projects, the phenol consumption structure in China has made a fundamental change and gradually come to be on a par with the international community. Today bisphenol A has overstepped phenolic resins and become the biggest consumption sector of phenol. The consumption of phenol in bisphenol A accounts for around 46% of the total. Phenolic resins come next, and the consumption of phenol accounts for 42% of the total. With the completion of the 200 kt/a phenol-process cyclohexanone unit in Fujian Shenyuanxin Material Co., Ltd., in July 2017, the consumption of phenol in cyclohexanone has started to come to the fore. 

   The phenol market, however, also has some factors favorable for price rise. Quite a few phenol units in Asia will conduct planned overhaul (See Table 1 for detail).  It will likely form a backing to the price of phenol in Asia in the first half this year. A phenol capacity of around 3.00 million t/a in Asia will be in a state of shutdown for overhauls in the first half this year.

      Table 1   Overhaul plans for phenol units in Asia in 2019  (kt/a)

   Moreover, the expansion of some downstream projects will also promote a price rise of phenol. See Table 2 for detail. The 150 kt/a cyclohexanone plant of Taiwan CPDC located in Rudong of Jiangsu will start production in April 2019. Jiangsu Changsu Changchun Petrochemical Co., Ltd. will put a 135 kt/a bisphenol A unit on stream in Jiangsu in June or July 2019. Lihuayi Group Co., Ltd. plans to launch its 120 kt/a bisphenol A plant in Shandong in the fourth quarter of 2019. Covestro will also expand its bisphenol A capacity in Shanghai in the fourth quarter of 2019.

   Table 2  Expansion plans for phenol and downstream products during 2019-2020  (kt/a)

   With the constant growth of the phenol-bisphenol A-PC industrial chain and the sound development of the phenol-based cyclohexanone sector, the phenol market in Asia will be given a boost from the demand increase. The unsatisfactory performance of traditional demand sectors will, however, limit demand growth and suppress the price rise margin in the phenol market.