Amidst Faltering Downstream Demand and Weak Upstream Support, European Phenol Prices Plummet

Hamburg (Germany): Over the past few weeks, Phenol prices have continuously declined in Germany's domestic market. The offtakes from downstream Bisphenol A industries have not improved, leading to bearish market sentiments among Phenol manufacturers. Despite efforts to address supply chain bottlenecks, the German manufacturing sector is still experiencing a slowdown due to diminishing demand. Despite lower inflation from recent European Central Bank policy measures, subdued demand in the construction sector has prevailed, negatively impacting Phenol market sentiments. Consequently, manufacturer quotations have declined accordingly.

According to the ChemAnalyst Database, Phenol prices dropped by approximately USD 150 per ton by the week ending 10th May compared to prices in the middle of the previous month. Market sources indicate that downstream Bisphenol A industries reportedly showed reluctance to procure as they already had sufficient availability of finished Phenol stocks in their inventories. Additionally, lower Benzene prices have eased manufacturing costs for downstream Phenol, further supporting the market's downward trend.

Furthermore, Brent crude futures started May with a notable decline, dropping 3% to hit a seven-week low of USD 83.29/barrel. This decrease was fueled by growing US stockpiles, indicating a rise in supply and sparking worries about weakening demand. Furthermore, optimism regarding a potential ceasefire in the Middle East played a role in reducing the commodity's risk premium. Consequently, Brent crude was almost 10% lower than its peak of $92.18 per barrel in April 2024. Uncertainties in the global economy and concerns about the US Federal Reserve's plan for prolonged higher interest rates have contributed to dampened crude oil prices this month. Additionally, high US crude inventories have added to the downward pressure on prices.

On the other hand, South Korean Phenol manufacturer Kumho Petrochemical recorded sales of 1.6675 trillion won and an operating profit of 78.6 billion won in the first quarter. This marks a 3.1% and 40.4% decrease from the same period last year, respectively. However, compared to the previous quarter, sales and operating profit have shown recovery, increasing by 10% and 123.7%, respectively. The company noted improvements across its entire business, including in synthetic rubber, synthetic resin, phenol derivatives, and special synthetic rubber.

According to ChemAnalyst's pricing intelligence, Phenol price trends might remain low as demand from the end-use market is not expected to recover towards the second half of the quarter. However, in the Asian market, downstream market participants of Phenol might increase procurement levels amidst an expected improvement in demand from the construction sector in the coming weeks.