Phenol, acetone demand to stay soft in H2 amid largely ample supply

Global demand for phenol and acetone is set to remain low in the second half of 2024 amid weak buying interest across the chain and sufficient product availability in Asia and Europe, while supply in the US acetone and methyl methacrylate markets is likely to be tight.

Asian exports to increase amid additional capacities

The Indian phenol market is likely to remain well-supplied, with prices highly susceptible to the upstream benzene cost, market sources said.

Phenol demand from the downstream laminates and phenolic resin segment is expected to remain stable to weak, slightly pressured by soft demand from the agrochemical sector. Supply-wise, strong availability from the domestic and international markets is likely to keep Indian inventories healthy and prices under pressure.

Meanwhile, the country's overall acetone demand is expected to remain firm amid tight global supply, supporting prices.

"Acetone demand from the paint and coatings sector would remain firm and the pharma-driven demand should be stable," a trader said. The commissioning of the 30,000 mt/year downstream methyl isobutyl ketone capacity by December should contribute to additional acetone demand.

In Northeast Asia, phenol and acetone producers are struggling to rebalance the market in the wake of new production capacities in China, with exporters increasingly seeking markets outside of Asia as well as high benzene prices this year. In that sense, the Asian bisphenol-A market is likely to face a rise in supply amid the producers' return from turnarounds in Thailand and Singapore.

With new capacities coming online in China, increased polycarbonate exports are anticipated. Foreign attention toward Chinese polycarbonate is also on the rise, reflecting possible global demand shifts.

High methyl methacrylate pricing in 2024 has impacted demand as some India and Southeast Asia buyers stepped back from buying at current levels, sources said.

The CFR China MMA price hit $2,100/mt in May, the highest since March 11, 2021, with Southeast Asia prices following, Platts data from S&P Global Commodity Insights showed. In August 2023, the CFR China MMA price hovered around $1,500/mt.

Market participants expect prices to reduce gradually over June and July as at least two MMA units in China are expected to return to production.

US phenol demand to remain sideways

Phenol market participants in North America expect stable conditions in H2 2024 amid subdued demand on the back of macroeconomic inflationary pressure on housing and construction as well as elevated feedstock benzene costs.

Phenol demand may be impacted by the arrival of downstream imports, namely epoxy resins for which BPA is a key feedstock, accounting for over one-third of the total North American phenol demand. The recently launched antidumping investigation into epoxy resins from Asia could generate trading shifts, affecting prices. Eyes were also on the effects of the upcoming hurricane season, with peak months in August and September.

Acetone market participants expect stability with no major swings in pricing. Low phenol operating rates and limited spot availability should continue to weigh on acetone production, they said.

While acetone product availability is expected to be supported by these imports, no decrease in pricing is expected due to persistently high freight rates between the US and Asia impacting arbitrage, sources said.

US MMA supply should remain tight amid the lack of phenol imports, while suppliers underestimated the pickup in demand, market sources said.

"Everybody under-contracted," a source said, adding that "domestic operations will have to cover these shortages."

The market is expected to take direction from the coming online of new capacity that uses ethylene as a feedstock, signaling a shift away from acetone. US MMA capacities are expected to increase with the commissioning of Roehm's 250,000 mt/year ethylene-based unit, expected from late 2024 to early 2025.

Healthy phenol supply despite turnarounds in Europe

European acetone and phenol markets should continue to face low demand as market participants do not see clear signs of recovery.

"Despite the heavy maintenance period in the region, supply will continue to meet demand requirements; however, acetone availability will remain limited," Yazmine Khan, director of phenolics analytics at S&P Global Commodity Insights, said.

"Ineos Antwerp will remain idle; we don't expect it to restart. This will enable domestic European producers that are running to run at higher rates," Khan added. "This means that though nameplate operating rates are low, effective operating rates in the region look much healthier."

The US is expected to remain the main export outlet for Europe amid the open arbitrage, sources said.

The European MMA market should continue to depend heavily on imports, and if prices in China decrease, the arbitrage can open again, with more volumes heading to Europe, they added.

For polycarbonate, stable to slow demand, at least up to August, is expected, with more uncertainty toward the end of the year.

Demand is not going to move the European automotive industry much and is probably slightly lower compared to last year, a source said.

"Construction was stable at low levels," they said, adding that "it doesn't look like it is going up in the next few months."

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Chemical Trends H2 2024
This feature is part of our bi-annual report analyzing the biggest themes and trends that will dominate chemicals markets in the year ahead. Explore more features below, or to read articles looking at the year ahead for a wider range of chemical markets, visit Platts Connect

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